Industrial players want to grow taller: With industrial players seeking reconciliation for building violations under recent law amendments, they’re increasingly demanding the greenlight to expand their buildings vertically, especially those located in congested industrial zones, a number of industry players told Enterprise.

BUILDING RECONCILIATION AT A GLANCE-

A quick recap: The long-awaited Building Reconciliation Act aims to make it easier for owners of unauthorized buildings built by 15 October 2023 to legalize their properties in return for paying a reconciliation fee. The law replaced a bill from 2019 that did not specify procedures for how local authorities would collect fees, leading to a backlog of unresponded reconciliation requests and unpaid fines.

Last we heard: The cabinet approved the executive regulations for the new Building Reconciliation Act in April after the law was ratified in December. And last month, the cabinet approved a draft decision introducing a 25% reduction on building reconciliation fees for building owners who pay the full fees upfront.

Violations are a lot more common in residential areas: The number of building violations in the industrial sector isn’t as high as in residential areas because industrial zones are regularly monitored and inspected to make sure factory owners comply with the rules, Mohamed El Bahy, board member at the Federation of Egyptian Industries, told Enterprise.

** We dove into the ins and outs of the new act in a Hardhat last year.

THE INDUSTRIAL ANGLE-

The door is open: The Industrial Development Authority (IDA) has opened the door for industrial players to submit their reconciliation requests after the act’s executive regulations were passed by the cabinet.

Who should get in line? Industrial players with buildings that violate height limits, construction violations, or are located on land registered for residential use will need to get their reconciliation requests ready.

The fee breakdown: Construction violations could face between EGP 5-20k in reconciliation fees, using land for other than its intended purpose could cost EGP 30-120k in reconciliation fees, and the fees for the complete construction of the roof ranges between EGP 20-80k.

Terms and conditions apply: Violators must pay 25% of the fee upfront as a “seriousness” fee.

VERTICAL EXPANSION-

Adding extra floors is less costly than expanding horizontally: The demand for vertical expansion — instead of horizontal — is significant for the industrial sector because of its cost effectiveness, El Bahy said. This is especially true in the current context of pricey industrial land.

It’s unclear why industrial buildings are constrained by such extreme limits: The maximum building heights permitted in industrial areas are much lower than nearby residential towers, he added, pointing to the need to allow industrial players to expand vertically, especially in busy industrial areas where horizontal expansion is no longer possible.

Some steps in the right direction: Officials have discussed allowing height extensions for factories looking to add new machinery to increase their production capacity, head of the Tenth of Ramadan Investors Association Samir Aref told Enterprise.

THE SECTOR NEEDS SPACE TO GROW-

Whether expanding upwards or outwards, Egypt’s industrial sector needs more space. The industry needs more land plots with the necessary infrastructure at various price points, both Aref and El Bahy said. Many areas in the Tenth of Ramadan industrial zone still lack necessary infrastructure, even though there’s high demand from projects of all sizes. They called for faster availability of land for expansions or new projects.

Price concerns persist: It’s important to make sure that land provision doesn’t drain capital — moderate pricing should be adopted, Aref stressed. He proposed leasing options to accelerate production.

Switching up the process: Investors want the IDA to be fully responsible for handing out land plots, Atef said, adding that this would ensure the speedy completion of the allocation process. At the moment, it is the New Urban Communities Authority that’s responsible for allocating land.

DEMAND IS HIGH-

There’s been a surge in demand from Turkish and Chinese investors: The region has seen unprecedented interest from major companies, particularly Turkish and Chinese investors, who have asked for swift land allocation from the authority, Aref said.

But, should local investors come first? Nadim Elias, chairman of the Federation of Egyptian Industries’ printing and packaging export council, believes that local investors should be given priority when it comes to land allocation or expansion approvals.

More industrial land than ever before: The state has increased its industrial land allocation by 40% y-o-y in the fiscal year 2023-2024, IDA chief Nahed Youssef said.

Case in point: The IDA is offering fully-equipped industrial units for glue production and leather tanning in the Robbiki Leather City. Interested investors have until 27 June to purchase the conditions booklet and put in efforts for the units.

Facilities ahead: The authority offers a number of incentives and facilities for industrial players looking to purchase land — cutting down the cost of applying for land plots.

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