Egypt Homebuilder Medinet Nasr Sees Contracts Rise Amid Turmoil

Medinet Nasr for Housing, the Egyptian developer of middle- to low-income homes, said sales contracts increased in 2011 even as country was roiled by political turmoil.

The Cairo-based builder reached agreements to sell homes valued at as much as 250 million Egyptian pounds ($41 million), Vice Chairman Hisham Akram said in an interview. The company collects 30 percent of a home’s value when a sales agreement is signed and the rest is paid in installments with a final payment when the property is delivered to the buyer.

The fourth quarter of 2011 “will be the strongest quarter yet because we handed over properties worth around 100 million pounds during the period,” Akram said by phone from the Egyptian capital.

Medinet Nasr was one of the few Egyptian developers that avoided legal challenges over land purchases made before President Hosni Mubarak was overthrown in February last year. Full-year sales rose, with a surge in November after successful parliamentary elections gave buyers more certainty about the country’s future, Akram said.

“Last year, our contracts were higher than 2010 even though that was a year of revolution,” Akram said. “We have sold around 300 homes in Al Waha and 150 homes in the Six of October project.”

The company earlier this month said it ended a partnership with Orascom Development Holding AG to develop a 3.5 million square-meter (37.7 million square-foot) luxury-housing project at Tigan in Cairo. Instead, Medinet Nasr plans to start work on 250,000 square meters of the land that won approval for development earlier, Akram said.

“Due to the ongoing events in Egypt, we have not been able to get government approvals for the new plan,” he said.

New Project

The project at Tigan will include 1,100 apartments to be completed 36 months after the start of construction. The homes will be sold for 790,000 pounds to 1.5 million pounds, Akram said.

Medinet Nasr, 31 percent owned by Beltone Financial Holding SAE, is seeking government approval for a housing development near its Km 45 development in Cairo and plans to start construction in the fourth quarter of this year, he said. Egypt’s government owns 15 percent of the company through the National Co. for Development & Building.

Not all the company’s projects have fared well since the revolution. Medinet Nasr’s National Housing project is on hold after only 250 of the 700 homes were sold. Sales stalled after Egyptian Housing Minister Mohamed Fathy El-Baradei, announced that the government would develop 1 million homes for low-income families. The prices announced by the minister are close to the cost of construction, causing many buyers to cancel purchases with Medinet Nasr, Akram said.

Competition With State

“We are still continuing with the project’s construction but the sales have stopped,” he said. “The land disputes have led the ministry of housing to exclude private developers from work on national housing projects, even though this model has worked best in many countries.”

Egypt’s government has never been able to build more than 70,000 low-income homes a year in partnership with private companies, he said.

“I don’t expect the government will be able to uphold its promise,” Akram said. “The decision to exclude the private sector will be reversed but only once a new government is in place and after realizing that populist policies won’t solve the housing shortage.”