{"id":584109,"date":"2023-03-26T00:00:00","date_gmt":"2023-03-26T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/new-land-allocations-system-could-help-bring-in-more-industrial-investment\/"},"modified":"2023-03-26T00:00:00","modified_gmt":"2023-03-26T00:00:00","slug":"new-land-allocations-system-could-help-bring-in-more-industrial-investment","status":"publish","type":"inside_industry","link":"https:\/\/enterpriseam.com\/egypt\/inside_industry\/new-land-allocations-system-could-help-bring-in-more-industrial-investment\/","title":{"rendered":"New land allocations system could help bring in more industrial investment"},"content":{"rendered":"

<\/span>Could we be seeing a new industrial land allocation system put in motion?<\/span> Industrial<\/span> expansion plans are being restrained by a shortage in industrial land offerings, which has failed to keep pace with skyrocketing demand, creating a parallel market for industry-geared plots rife with inflated prices, industry insiders tell Enterprise. A number of new schemes are being teased out to address the problem, but just how effective they are remains to be seen.<\/span><\/p>\n

The problem has been a few years in the making: <\/span>The current turbulence in the market goes back to a couple of years ago, when the government started allocating more land for industrial activity and issued more permits for their sale and development. But most of the industrial land the government put up for grabs remained seriously underutilized. At the time, the government estimated that, out of the some 30 mn sqm it had offered, only 3 mn sqm were being put to use.<\/span><\/p>\n

But a new system could offer a solution:<\/span> The government has since crafted a new online system through which industrial land developers can purchase, develop, and resell land to industry, instead of the previous system in which land was made directly available to industrial players. The New Urban Communities Authority (NUCA) agreed <\/span>earlier this month<\/a><\/span> to allocate some 12 mn sq m in four cities (New October, New Fayoum, New Alamein, and New Aswan) to several industrial developers who placed bids through the authority\u2019s online portal. <\/span><\/p>\n

The guidelines for these new offerings:<\/span> Land plots will be rolled out to developers in two phases with a six-month grace period starting from the day industrial developers are transferred the rights to the land and receive final approval from the Trade Ministry. Developers will have a total of five years to complete both phases of the project and six months from the date on which a land sale has been made to complete the first phase. Projects will only be eligible to enter into their second phase once 35% of building construction and 100% of facility construction has been completed. These facilities will also be required to remain compliant with the Unified Building Act. If any development beyond the scope of the project\u2019s initial plan is made, payments would need to be arranged after technical approvals have been received.<\/span><\/p>\n

While the system might address the under-supply issue, it\u2019ll likely drive up costs.<\/span> Since private industrial developers will now be responsible for building the necessary infrastructure and otherwise making these plots more attractive to investors, they will likely set higher prices than if these same plots were directly offered under an usufruct or long term repayment scheme by the government, SMEs Union head Alaa El Saqty told Enterprise. <\/span><\/p>\n

Industrial land prices are already on the rise: <\/span>In NUCA\u2019s initial land offerings, prices were at EGP 1.2k per sqm. Now, they\u2019re about EGP 1.5-1.6k per sqm of industrial land. With industrial developers now in charge of sales, prices are expected to go over EGP 2k per sqm, El Saqty tells us. These increases would surely become an obstacle to industrial growth, Mohamed El Mohandes, head of the engineering industries division at the Federation of Egyptian Industries (FEI) explains.<\/span><\/p>\n

These changes could alter the way many companies operate: <\/span>Most companies used to purchase land at low prices and dedicate most of their CAPEX to building up facilities and installing new technologies, El Mohandes explained. Now, financing land purchases will consume a larger portion of companies\u2019 CAPEX spending. The alternative scenario is one in which unaffiliated industrial lands are put on offer, at the cost of slowing down implementation schedules.<\/span><\/p>\n

Still, demand for industrial land outpaces supply by a long shot: <\/span>According to several insiders we\u2019ve spoken to, demand for industrial land is growing, with thousands of requests for extremely limited spots on only a few areas of industrial land. Some developers have taken advantage of this asymmetry and jacked up their prices, our sources say.<\/span><\/p>\n

There are a few locations where demand is especially high: <\/span>\u201cWe want to offer more land in the industrial areas around Cairo from October to Beni Suef, since we\u2019re seeing a large number of requests at competitive prices,\u201d El Saqty tells us. It is necessary to offer land for industrial expansion in existing industrial zones at reasonable prices, Sayed El Barhamtoshy, a member of the Tenth of Ramadan Investors Association tells us. <\/span><\/p>\n

There are now three ways for industrial players to get their hands on land: <\/span>There\u2019s<\/span>full ownership, usufruct rights and long term repayment plans, Mohamed Abdel Karim, head of the Industrial Development Authority (IDA), tells us. Prime Minister Moustafa Madbouly late last year said that industrial land was made available and that usufruct and ownership rights were approved for all manufacturers. Land prices were also said to be regularly announced through a centralized system to ensure no price gouging was taking place. The government <\/span>last year<\/a><\/span> also approved measures meant to make it easier for industrial developers to buy land in a per-meter pricing mechanism that takes into account the cost of utilities.<\/span><\/p>\n

Incentives under the new online land reservations system: <\/span>So far, over 1k plots of land were offered with incentives like fee reductions for new requests and doing away with the requirement that companies provide letters of guarantee from banks along with their applications, to encourage more investment.<\/span><\/p>\n

And there are some other schemes in the works: <\/span>El Saqty told us that he has proposed the government rescind the legal provision that bars industrial developers from utilizing or selling unused portions of their land allotments for projects beyond the scope of their licenses. The plan, which Madbouly has granted initial approval and is pending further study, could avail some 10 mn sqm of industrial land, El Saqty claims. Setting up an industrial land bank that manages the process of offering lands to investors and the payment mechanism is another proposal put forward by the Investors Union to conflict between various entities. <\/span><\/p>\n

Just a few more steps<\/span>: Although the government has been taking industrial sector demands into account, faster decision-making and implementation will be crucial for these plans to succeed, El Saqty and El Mohandes tell us.<\/span><\/p>\n

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