Changing Cairo

Cairo is hot, dusty, crowded, corrupt and dilapidated. The city’s resources have simply reached breaking point. Get stuck in one of the many traffic jams and it can take well over an hour just to cross the Nile. Pollution is heavy and visible. Downtown, quiet does not exist at any hour. With the electricity and water grids pushed to the brink, rolling blackouts and water shortages are not uncommon. So people have left, and moved away from the city center. Cairo’s first string of suburbs — such as Maadi to the south and Heliopolis to the northeast — have become popular. Wide boulevards, gardens and villas characterize these neighborhoods, which had earlier been the locales of choice for the British colonial enterprise. Yet, with time, some of the city’s problems have started seeping into these suburbs too. Now alternatives are being offered, for a price. In the desert to the east and west of the city, private developers are building up massive residential communities. They promise luxury, suburban living, plenty of green space and water — in short, the opposite of what is offered by Cairo. Downtown, gears are turning too. After decades of neglect, both the private sector and the Egyptian government are working toward regenerating the area, fixing many of the problems that drove people away and restoring its former status as the heart of the capital, the country, and perhaps even the Arab world. With tens of billions of dollars in the mix already and the lives of millions of Egyptians set to be affected, this new development surge is significant. But while the projects are ambitious, the future of Cairo remains uncertain. 

Downtown’s faded glamour

Ambitious developments plan to restart the heart of Cairo

Cairo was supposed to have one of the world’s finest city centers. Redeveloped at the end of the 19th and early 20th century during British colonial rule of Egypt, the downtown core was fashioned to be the residence and leisure playground of local and international elites. Foreign architects constructed the area in a style reflecting Paris, with large, ornate buildings lining the district’s wide boulevards.

But the area’s heyday was cut short by the 1952 Egyptian Revolution, when downtown Cairo began a steady slide into decay. As part of his populist reforms, President Gamal Abdel Nasser, who took power in 1956, introduced rent control laws in Egypt, with tenants paying fixed rates of generally no more than a few dollars per month. Rent contracts were transferable and did not expire, meaning that even now, downtown apartments are incredibly cheap. Landlords, unable to make money from the buildings they owned, had no incentive to carry out even basic maintenance and the architectural gems of the past were left to rot.

Stroll through downtown Cairo today and one can make out only the faintest traces of the names of lost and forgotten upscale department stores and restaurants, nearly faded from existence between the jumbled signs and weathered facades of crumbling structures. Pass by the ubiquitous doorman to enter a dark, high-ceilinged lobby and cracked light fixtures cast a dim glow over broken stairs littered with rubble and trash. Ancient elevators offer a jerky, heart-pounding ride to the upper floors.

Egyptians with enough money have moved on, to neighborhoods such as Zamalek, Mohandiseen, Maadi and Heliopolis, and more commonly today, to gated communities in the desert. Meanwhile, downtown’s rock-bottom rents make it popular with lower income tenants, with the poorest living on rooftops in shacks designed for storage. Cheap clothing and traditional food stores crowd the streets and many buildings are no longer used for their original purposes.

Many Egyptians have written off the downtown core and resigned all trace of its glory days to the dustbin of history. But lately both the Egyptian government and the private sector have launched efforts to revitalize the area and restore its place as the cultural and economic heart of Cairo.

The history of modern Cairo

The blueprint for Modern Cairo – including the downtown area – was largely inspired by the vision of Khedive Ismail, the ruler of Egypt between 1863 and 1878. Egypt’s treasury received an unexpected boost when naval blockades during the American civil war cut the world off from United States cotton, leaving the market desperate for Egyptian stock. Encouraged by his country’s new found wealth, Ismail was determined to turn Egypt into a developed country that could stand shoulder-to-shoulder with any in Europe. With Paris as his model, he oversaw a building boom of wide avenues, gardens and luxury villas. He even hired the chief landscaper from the city of Paris to help with designs. Ismail revealed the new-look Cairo to the world in 1869, when he invited foreign dignitaries to the opening of the Suez Canal.

Just 10 years later, however, the story was very different. Egyptian cotton was no longer in such high demand and the economy could not make up for

Ismail’s rampant spending on development. As the country sunk into bankruptcy, control of Egypt’s finances was largely turned over to European banks. Eventually British troops moved in to quell a rebellion and occupied the nation in 1882.

Under the British, downtown Cairo became the center of the city. The architecture reflected the city’s cosmopolitan flair at a time when one in eight residents of Cairo were foreign-born and foreigners controlled the vast majority of the country’s financial assets. It was a world apart from the downtown of today, filled with bars, foreign department stores, lavish theaters and fine restaurants.

The reign of downtown came to an abrupt halt on July 23, 1952 when future president Anwar el-Sadat’s voice filled Egypt’s airwaves, announcing a revolution by the Free Officers Movement against the country’s puppet monarchy, British influence and the economic and social hierarchies they created. Redistribution of wealth was the new name of the game and the privileged Egyptians and foreigners who lived, worked, shopped and drank in downtown’s beautiful belle époque and art deco buildings quickly found themselves on the out.

The next SoHo?

Karim Shafei, the chief executive officer of Al Ismaelia for Real Estate Investments, envisions a downtown Cairo akin to Manhattan’s trendy SoHo neighborhood or Meatpacking District, with hip sidewalk cafes, boutique hotels, art galleries, rooftop bars and fashionable flats for “yuppies” all on the cards for a part of town that is currently anything but trendy. Shafei is leading the private sector charge to revitalize downtown and reestablish the area as a destination for visitors and moneyed Egyptians.  “We want to revive it as a center of culture and art,” he says.

The plan is simple. Al Ismaelia is setting out to buy many of the architecturally beautiful but dilapidated buildings downtown. Under the company’s control, they are to have their interiors completely renovated while the facades are left intact. After refurbishment, spaces in the buildings will be rented out as apartments, offices, restaurants and shops.

Al Ismaelia has already spent $67 million to purchase 20 buildings in downtown Cairo and is in the process of expanding its capital to between $80 million and $100 million to purchase another 20 to 30 buildings. When acquisitions are completed, Al Ismaelia hopes to own some 10 percent of all the buildings in the downtown area, adding up to one million square meters of real estate.

Unsurprisingly, the venture has attracted some heavyweight investors. Major stakeholders include Egyptian billionaire and owner of Orascom Development Samih Sawiris, Saudi equity firm Amwal Al Khaleej and Egyptian investment bank Beltone Financial. Before investors were moved to Al Ismaelia, Samway Hills Ltd. — a British Virgin Islands-registered company — acted as the investment vehicle for the project. In Samway Hills, Samih Sawiris held a 35 percent stake and Amwal al-Khaleej 31 percent, with the remainder split up among other investors.

The buildings have cost Al Ismaelia anywhere from $700,000 to $5.62 million apiece. The firm’s acquisition efforts have fueled speculation in the downtown real estate market, prompting some building owners to ask for much higher figures. As Al Ismaelia is trying to buy clusters of neighboring buildings in key downtown areas, this puts the company in a more difficult and expensive situation. The eventual goal is to reintroduce in the area wealthier residents and visitors, for whom downtown was originally built.

Preserving downtown Cairo’s cultural heritage

In the past, downtown Cairo served as a hangout for Egypt’s artists and intellectuals. Celebrated writers, such as Egyptian Nobel laureate Naguib Mahfouz, would congregate at downtown bars such as Café Riche and Groppi’s on Talaat Harb Square to bask in the area’s cosmopolitan air.

Today, Groppi’s has kept its classic ceramic motif out front but has seen its glory fade in its present life as a bakery and Café Riche. The café, while retaining the same 80-something-year-old Nubian waiter who served the likes of Mahfouz, seems to be closed most of the time.

“Until the 1970s, everybody was present in downtown: Christians, Catholics, Orthodox, Muslims, Jews, Italians,” says Alaa al-Aswany, a best-selling Egyptian author. “I believe that now this neighborhood has become more and more weak.”

In 2002, Aswany penned The Yacoubian Building, a fictional tale of the real Yacoubian building located at 34 Talaat Harb Street in the heart of downtown Cairo. Through vignettes, Aswany weaved a tale that related the deterioration of downtown Cairo to perceived declines in Egyptian state and society.

The book, which has been one of the top-selling Arabic-language novels since it was published, reminded Egyptians of downtown’s heyday when it was constantly featured in literature, film and song.

To those like Aswany, the self-imposed exodus of the rich to desert communities signifies a fault line in Egyptian culture and a break with the cosmopolitan Cairo of the past.

“You can see clearly that they don’t feel secure. They tend to live in compounds with 24 hour security – they feel at [any] moment there will be some kind of unrest in Egypt,” Aswany says. While the author has weathered the decay and stayed close to downtown, he is among a dying breed.

“What we want to do is create a small space for the middle and top markets,” says Shafei.

Downtown was alien to Shafei until he came to an art exhibition held there in 2000. After that initial visit, Shafei’s love affair with the historic district began — he even took his American wife to the area for the couple’s first date.

“Our vision is that downtown is a meeting point and a melting pot for all the different segments of society,” he says. “[In] Manhattan you could be selling hot dogs to a CEO of one of the top 30 companies in the United States — you’d still be walking the same sidewalk, buying from the same [coffee shop].”

Fears do exist that a redevelopment plan focused on downtown Cairo could change the entire character of the area — a criticism often levied at Solidere, the Lebanese company that rebuilt war-ravaged downtown Beirut.

A city in brief

Cairo is home to roughly a quarter of the country’s total population, an estimated 20 million people. With Egypt growing by one million people every year, the capital is only getting more crowded. While the country’s per capita GDP has risen to about $6,000, an estimated 40 percent of Egyptians continue to live on less than $2 a day, and poverty is rife. In Cairo, about half of the population lives in illegally built “informal settlements” that, when occupied by the poor, generally lack water and electricity.

“We actually take Solidere as an example of what we don’t want downtown to be,” says Shafei. “I personally adore downtown Cairo because of all the mistakes in it. It’s genuine, it’s upbeat, it’s organic, it’s alive.”

To ensure that Al Ismaelia gets it right the first time, the company has enlisted the help of the Harvard-affiliated Institute for International Urban Development, a not-for-profit corporation that promotes sustainable urban development.

Despite the well-ordered plan, Shafei acknowledges that refurbishing even 10 percent of Cairo is not going to be easy. “There’s a huge risk associated with such a project. The minute you have a project that runs for 10 years the risk factor alone is much higher than a project that runs for two years,” he says. No actual refurbishment efforts have begun as of yet, but Al Ismaelia plans to begin work on selected buildings within a year or two. However, Shafei thinks that it will take at least seven or eight years for the project to start to have a real impact.

But Shafei says investors need not worry: “From the financial point of view, we think the company is going to start making money — serious money — in a couple of years.”

While Al Ismaelia is the first home-grown private initiative to rehabilitate areas of downtown Cairo, there may soon be others.

“We will set the example that will motivate other owners to do the same thing,” says Shafei. “Obviously, they will benefit from what we do and eventually they will catch up and we will benefit from what they do.”

The government and downtown

Private sector groups are not the only ones interested in downtown. The Egyptian government is also getting involved and with state institutions owning around 50 percent of downtown’s buildings, they are in a prime position to redevelop the area. In 2007, the Egyptian government announced the Cairo 2050 plan to modernize the city and improve its infrastructure over the next 40 years. 

Many of the details of the plan remain vague, but its major goals include creating more green space in the city and reducing Cairo’s notorious transportation and congestion problems. One of the Cairo 2050 plan’s  initial projects — the redevelopment of downtown Cairo — is already in the works and earlier this year the government invited international firms to submit design ideas.

AECOM, a Los Angeles-based engineering firm with revenues of $6.3 billion in the first half of 2010, won the bid with a vision of a pedestrian-friendly and green downtown that would reconnect the area with the nearby Nile River. 

With a presence in the region since 1965, the firm has based its regional operations out of Abu Dhabi and has been involved in a number of high profile projects in the Middle East in recent years, including development of Abu Dhabi’s $27 billion Saadiyat Island and Medina’s $7 billion Knowledge Economic City. In Dubai, AECOM established a master plan for the city’s historic Bastakiya neighborhood and, most recently, won a $80 billion contract from the Libyan government to oversee the creation of 160,000 housing units in Benghazi.

“We’re going to have a facelift for downtown,” says Sahar Attia, managing director of Associated Consultants (AC), a Cairo architectural firm that AECOM selected to partner with for the project.

According to maps of AECOM and AC’s master plan provided to Executive, unsightly clogged arteries of traffic running along the Nile and separating the river from downtown will be moved, replaced with leafy waterside promenades, marinas and restaurants. A pedestrian bridge will be added to the area, certain streets will be reserved as “entertainment streets” and a tram service will be installed.

Though the urban plan is the bulk of the project, Attia hints that refurbishment of buildings will also be in the cards. But while the plans are ambitions, she says downtown will not be turned into one giant construction site and the historic buildings in the area will not be jeopardized.

“The challenge of this project was how to be innovative while conserving the patterns, the buildings and the values,” says Attia.

AECOM and AC are only providing the urban and business plans for the project; it will be up to the Cairo Governorate to execute it in its entirety. While no price tag has been set yet, the plan will be expensive and the government will most likely turn to private investors to finance its completion. AC is currently conducting studies on how to best proceed with the plan and Attia says that several pilot projects, such as creating pedestrian-only streets, will be implemented within the next year. The overall project though, she says, will probably not see completion for 10 to 15 years.

The notorious bureaucracy of the Egyptian state could mean that things will move slower, however. “I think it’s very tough to work in Egypt as a consultant because you always have the input of the politicians to be considered,” says Attia.

While currently it only exists on paper, when implemented the plan could radically reshape the Egyptian capital.

Unhappy neighbors

Tarek Kalmaty says Al Ismaelia is a “bad company.” Kalmaty, the owner of Memphis Bazaar — a souvenir store selling faux-Pharaonic knick knacks, perfume and other gifts — rents his shop in a building that has come under the ownership of Al Ismaelia, and worries that the real estate company is trying to push him out of business. “They want to destroy the buildings,” he says. “They want to remove us from here. They have tried this with all the shops [in this building].” Kalmaty is part of a large number of downtown Cairo residents and business owners who he says oppose Al Ismaelia’s rejuvenation plans for the area, fearing forced evictions.

For some, the anxiety may be warranted: the company’s commercial vision of new boutique hotels, restaurants and entertainment venues catering to those with high incomes does not include the majority of the shops in the area, which rely on middle and lower income clientele. While the existing commercial outlets in downtown are certainly neither haute couture nor gourmet cuisine, the endless rows of inexpensive clothing stores and fast food outlets keep downtown packed with pedestrians until the early hours of the morning every day.

In buildings it owns, Al Ismaelia will decide which businesses it wants to keep. The company apparently did not want to keep Kalmaty’s shop — which has been in his family since 1959 — and offered him money to vacate, he says. However, Kalmaty feels the figure offered by Al Ismaelia was far too low. To leave voluntarily, Kalmaty says, Al Ismaelia would need to offer a somewhat unfeasible $1 million in compensation and provide him with a new store in the downtown area. Until then, he says he is staying put.

“It’s our shop. It’s my grandfather’s shop, it’s my father’s shop. I will not leave it for anybody — even if it will be the last day of my life,” Kalmaty says. Even if he was allowed to stay, rent would likely be much higher. Currently, Kalmaty pays less than $53 per month in rent — good value for a ground-floor storefront just blocks away from the tourist-packed Egyptian Museum. With his business, like many downtown, operating on slim margins, it is unlikely he would be able to afford rents set by Al Ismaelia, aimed at bringing in high-end retailers. While the developer flatly refutes claims that it plans to destroy any of the buildings it has bought, they do not deny that there will be some displacement caused by its activities.

“Some of the activities will be displaced, but some are not productive activities to start with — we don’t need to have mechanics or car repair shops or shops selling accessories for cars in downtown Cairo,” says Shafei, referring to a large market occupying a corner of downtown that primarily caters to automobile care.

Residents of buildings are less of a concern, says Shafei. In June, out of 370 units owned by the company, only 30 were residential. As the cultural and historical significance of downtown Cairo is one of the driving factors behind Al Ismaelia’s plans, Shafei says that the company will make efforts to ensure that certain segments of society who currently rent spaces in buildings owned by the company will stay put. To keep artists in the downtown area, for example, Shafei says that the company will offer free or subsidized rents along with free use of exhibition space in Al Ismaelia owned buildings, as well as keeping open the cheap cafes they frequent.

Desert development

With money as their fertilizer, real estate tycoons are turning Egyptian sand to grass

“Life begins in Madinaty,” beckons a billboard looming over a busy central Cairo street. A simple picture of a neat suburban home and green grass entices agitated motorists trapped in traffic to move to Talaat Moustafa Group’s new desert haven outside the city.

Such billboards are seemingly everywhere in Cairo these days. While some are for glitzy Mediterranean holiday homes, most tout the growing number of residential communities in the Sixth of October area to the west of Cairo and New Cairo to the east of the city. Placed along main drags of Cairo’s notorious gridlock, the boards encourage those who have the money to leave the city for a different life, with greenery and ponds, golf courses, traffic-free streets, office buildings and shopping malls onsite, and even, in some cases, a view of the pyramids. They invite residents with well-above average incomes to what some see as the new future of Cairo — one outside of the city, with the desert transformed into an idealized suburban utopia.

Though the developments are new, the idea has a long history in Egypt.

Under the regime of President Anwar el Sadat in the 1970s, Egypt moved to conquer the desert and diversify population concentration away from the narrow strip of the Nile Valley and Delta, where the vast majority of Egyptians reside. In 1979, the New Urban Communities Authority was created to help facilitate this.

Despite the government’s vision of making the desert bloom, these first ventures were not overly successful; with the perpetually cash-strapped Egyptian government often funding the projects, residents were usually left far from amenities and in bleak surroundings.

But this time around things could be different, with private capital leading the charge in a moneymaking venture rather than a Socialist living experiment.

After a virtual round of links, prospective buyers can sip a frappuccino while looking at scaled models of SODIC’s developments and choosing the interior design schemes of their future homes

Local companies, big projects

In the sales showroom for Six of October Development and Investment (SODIC), on the desert highway between Cairo and Alexandria, sits what must be one of Egypt’s only golf simulators. After a virtual round of links, prospective buyers can sip a frappuccino while looking at scaled models of SODIC’s developments and choosing either the Natural Zen, Modern Islamic or Urban Chic interior design schemes of their future homes.

Such trappings are necessary to give SODIC — one of the longest-operating big property developers in Egypt — a competitive edge in a market that has become flooded in recent years with both domestic and foreign companies offering luxury properties to the east and west of Cairo’s city center.  “Cairo has the infrastructure to support maybe five million people,” says Youssef Hammad, SODIC’s chief commercial officer. “We’re over 20 million today. So there is a natural movement of the population to the eastern and western suburbs.”

Next door to the showroom, SODIC is busy building Westown, a “mixed-use city center” which the company says will become the heart of West Cairo and compliment their Eastown project in New Cairo. Together, Eastown and Westown represent a $4.4 billion investment and when completed could be home to 106,000 people. Over the next three years, Hammad says, there will probably be 4 to 5 million residents in East Cairo and West Cairo, up from the two million or so he estimates live in the areas now.

Eastown and Westown are designed as the “anchors” or “downtowns” of these large suburban areas, places where people from other developments can come to shop, dine and work in a more urban atmosphere. Unlike many other developments, Eastown and Westown will not be gated. To make these mixed-use city centers a reality, SODIC has partnered with Solidere

International, the regional arm of the Lebanese firm that redeveloped destroyed downtown Beirut after the civil war. Solidere owns 20 percent of Westown and 6 percent of Eastown, with an option to invest further.

Beyond Eastown and Westown, SODIC is involved with more traditional housing developments too. The golf simulator back at the showroom was touting Allegria, a gated community being built up around an already completed 18-hole Greg Norman Signature golf course, in which SODIC has so far invested more than $351 million. When completed in 2012, the villas and townhouses edging the golf course should house another 5,000 people.

While SODIC’s projects are large, they are certainly not the biggest under construction. Talaat Moustafa Group’s (TMG) Madinaty is currently under construction in New Cairo and is expected to attract 500,000 people. Madinaty — meaning “my city” in Arabic — is reportedly worth $3 billion.

TMG would not comment on Madinaty, but the project’s masterplans show large golf courses and gardens, a hotel, medical complexes, a “megamall” and a downtown area.

Another major developer, Palm Hills Development, is taking a different approach. Staying away from the huge projects like Madinaty and Eastown/Westown, the developer instead has 10 smaller projects in and around Cairo and eight more elsewhere in the country.

“We have the largest diversified land bank in the country,” says Hibba Bilal, director of public relations for Palm Hills.

With large land plots in Sixth of October City and New Cairo and experience stretching back to 1997, Palm Hills has entrenched itself as a brand in Egypt. In the second quarter of 2010, the company posted its highest-ever quarterly sales, taking in $307 million. Since 2005, the company has sold more than 7,000 housing units.

Although developers’ main focus is currently real estate, many say retail is the next step and could be Egypt’s next boom after the country’s housing needs are met.

“Egypt today has one of the lowest penetration rates of retail space,” says SODIC’s Hammad. “I mean, we’re nowhere on the map. Some places in [sub-Saharan] Africa are significantly more developed than we are.” Currently, 70 percent of SODIC’s projects under development are either business or retail, though some of these are part of the company’s mixed-use city centers.

Palm Hills is also in the process of developing a mall and is simultaneously developing and redeveloping many hotels and resorts across the country.

A new direction or a repeat of history?

While the construction of private housing projects in the desert with the ability to hold half a million people might seem radical, The Economist’s Cairo correspondent and author of “Cairo: The City Victorious,” Max Rodenbeck, sees something familiar in the move. As the center of Cairo has shifted over the course of history, older areas have largely been left to abandon, he says. “[It is a] repeating cycle over thousands of years of discarding the old and building the new. The whole city itself just moves from one place to another. This has happened over and over again since ancient Egypt,” Rodenbeck explains.

The new gated communities also echo an ancient past.

“When you look at the shape of medieval Cairo, in some ways it wasn’t so different,” says Rodenbeck. “The city was divided into different haras [neighborhoods] where there were actually gates that were locked at night. So every neighborhood was a separate enclave – and often these enclaves were for particular categories of people.” For Diane Singerman, a professor at Washington, DC’s American University and the editor of “Cairo Cosmopolitan” and “Cairo Contested” – two books dealing with the politics of urban space in the city – the new desert communities have a different historical context. “You have kind of these utopian, fantasy places called Hyde Park and Dreamland and Beverly Hills,” she says. “It really smacks of Occidentalism and sort of reverting back to a colonial dual city where you have a city for the natives and a city for the expats.”

Dubaification?

Driving past large construction sites and billboards for Emaar, Al Futtaim and Damac along the highway cutting through the featureless desert to the east and west of Cairo, one could almost be in Dubai.

In recent years, a number of big-name Emirati development companies have set their sights on Egypt, seeing an opportunity to replicate the success that many of them experienced in Dubai before the global financial crisis.

Emaar Misr, a subsidiary of Emaar, has been working in the country since 2006, accumulating a $5.56 billion investment portfolio of Egyptian real estate. Currently, Emaar Misr has four projects under development, including two residential developments and a mixed-use commercial development in the Cairo area.

“Egypt is a major investment destination when it comes to real estate,” says Hazem Ashery, the general manager of Emaar Misr. “There is a great potential and the economy has been stable enough to attract a lot of foreign investors. The demand [in Egypt] is organic and domestic.”

For some foreign investors, there was some hesitation in getting involved in Egypt.

“When we first suggested entering the Egyptian market, we had many recommendations advising us against doing so,” says Mounib Hammoud, the CEO of Beirut-based Solidere International. “However, we saw in Egypt a growing prospect… with a population of over 80 million people, a growing economy and a growing real estate sector that is still in the early stages of development.”

Another part of the attraction of Egypt to these real estate investors, Ashery says, is that Egypt was more or less untouched by the global financial crisis. In Dubai, where Emaar, Damac and Al Futtaim are based, property prices plummeted in 2009.

“We launched Mividia (an Emaar Misr development) in 2009 in the middle of the financial crisis just to prove to everybody that Egypt was immune,” says Ashery, “and since then we’ve been experiencing very good sales there.”

Mividia is Emaar Misr’s $1.05 billion, 3.8 million square meter New Cairo development. Located next to the American University in Cairo, its 5,000 or so homes under development are being modeled on the architecture of Santa Barbara, California.

Emaar’s other Cairo residential development, Uptown Cairo, is presented as a competitor to SODIC’s “mixed-use city centers.” Set to occupy 4.5 million square meters of land above the Moqattam Hills just at Cairo’s edge — much closer to the city center than developments in Six of October City and New Cairo — the $2.11 billion project is aimed at becoming Cairo’s “new downtown.”

It’s not easy keeping everything green

Every day it takes 9,000 cubic meters of water to maintain the manicured and green 27-hole golf course at Palm Hills October, west of Cairo, according to John Hamilton, the president of Golf Resources International, which is responsible for installing the course. Across the developments in Sixth of October City and New Cairo, such green spaces – lacking in much of central Cairo – serve as a major draw to prospective buyers. While the rich can certainly afford the vast water bill to keep their environs green, many Egyptians could be left dry as the country’s water crisis worsens. Currently, Egypt is allocated 55.5 billion cubic meters of water from the Nile River every year under a 1959 agreement with Sudan. This enables Egypt to supply less than 1,000 cubic meters of water per year per person, which is generally considered the threshold of “water poverty.” By 2025, the report said, Egypt will be able to supply less than 600 cubic meters of water per person per year. With resources strained, water cuts have already began in parts of the country. With the government unable to keep up with demands for water and electricity, many private developers have taken such issues into their own hands, building electricity substations, sewage treatment plants and even desalination plants to ensure that residents of their communities continue living comfortably. The ability to provide such utilities – especially as Egypt’s population grows and the government’s capacity to provide water and electricity stalls – acts as a strong selling point for property developers.

Al Futtaim Group Real Estate has used more of a cookie cutter approach to Egypt. In New Cairo, Al Futtaim is building Cairo Festival City, a $3.6 billion project based on the group’s Dubai Festival City.

In the Emirati version (Al Futtaim’s first large-scale mixed-use urban project), the mostly-completed luxury waterfront community is expected to be home to 50,000 people. Set to be fully operational by 2015, Cairo Festival City will potentially hold up to 13,000 residents and 50,000 office workers over 3 million square meters of real estate.

Currently, Al Futtaim is privately funding the entire project, though it may be opened to investors at a later date. Like Emaar’s Uptown and SODIC’s Eastown, Cairo Festival City makes the claim that it will become the new center of the eastern reaches of Cairo.

“Given the location, the growth and the government’s commitment to foreign direct investment, it is easy to see why so many investors are looking to Egypt to achieve the growth levels they have previously experienced in more traditional markets,” says Niall McLoughlin, senior vice president of corporate communications at Damac. In Cairo, Damac is currently constructing Hyde Park, a $7 billion luxury residential villa complex and Centreville, a smaller project in New Cairo that mimics the old architecture downtown Cairo is famous for.

Not just the rich…

Despite appearances, Egypt’s new desert communities are not just for the rich. In one corner of Sixth of October City, thousands of small sand-colored, domed houses — a spitting image of Tatooine, the fictional Star Wars planet — rise up from the desert in neat rows. This is Haram City, so named because on a clear day one can see the pyramids, and it is the first large-scale private sector venture into budget housing outside of Cairo.

Currently, about 25,000 people live in Haram City. Developers expect that by the time the project is completed — in about 10 years — this figure will have swelled to some 400,000, living in up to 55,000 homes. Orascom Housing Communities, a Swiss-registered company owned by Egyptian billionaire Samih Sawiris and mostly known for its luxury Red Sea and Mediterranean resorts and residences, is behind the project.

Like the communities and mixed-use urban centers targeting Egypt’s wealthy, the development is to be a city in its own right, complete with schools, shops, healthcare facilities, offices and recreational facilities. In the second quarter of 2010, units in Haram City were selling for an average of $23,031, up from the same time in 2009 when prices were at $19,097. The current price per square meter in the city averages $365.

While these prices are high by Egyptian standards — where the GDP per capita runs just $6,000 — there are subsidies and payment plans available for buyers. With real estate considered a hot investment in Cairo these days, such development opens up the opportunity for low income and middle class buyers to get in the game, even if they are not going to live in the properties. “The affordable housing segment is profitable only when it achieves certain economies of scale, i.e. reaching high volumes of sales per annum,” says Mamdouh Abdel Wahab, a director of investor relations with Orascom.

In 2009, Orascom sold 156 units at a total value of $101.5 million at El Gouna, a self-contained luxury resort town on the Red Sea.  During the same period of time, the company sold 3,139 units at Haram City yet only pocketed $57.7 million. While Haram City represented more than 90 percent of the residential units Orascom sold in Egypt in 2009, it represented only 35 percent of the total value of properties sold.

Although Haram City might not offer the same financial payoff as the company’s other projects in Egypt and further afield, the interest that the public has shown is encouraging, and the project is expected to continue to generate further income for the company.

Beyond Haram City, Orascom is building a similar project in Fayyoum Oasis to the south of Cairo, and overseas has plans to develop 2.5 million square meters in Romania, along with budget housing projects in Turkey near Istanbul and Ankara.

Other property developers are starting to cater to the midrange and budget sectors too. On a 2.2 million square meter patch of land in New Cairo next to Talaat Moustafa Group’s Al Rehab City, Emaar Misr is building the $100 million Sheikh Khalifa City.

Described by Emaar as “a social project aimed at providing housing and jobs for the Egyptian youth.” Sheikh Khalifa City is funded by Sheikh Khalifa bin Zayed al-Nahayn, the ruler of Abu Dhabi. Like Haram City, Sheikh Khalifa City is set to be a fully functional, self-contained community.

Egypt’s population dynamics — generally low-income, young and growing at a rate of almost one million per year  — make budget and midrange housing developments an attractive option for developers like Orascom and Emaar.

As it’s not yet known if many of the large-scale luxury housing developments such as TMG’s Madinaty and SODIC’s Eastown and Westown will reach full occupancy, budget housing could become a more surefire alternative for developers.

Other developers have started to offer more affordable units, though not necessarily catering to the same shoe-string budgets as Orascom and Emaar.

“We started off as a very up-market, luxury [developer], but that’s obviously not the case anymore,” says Bilal of Palm Hills. “With the global financial crisis we’ve had to relook at our strategy. We started looking at building more affordable homes.”

In this climate, Palm Hills is looking to target a class of customers who can pay between $88,000 and $210,000 for a starter home.

Cairo of the future

For better or worse, Egypt’s capital is on an unstoppable slide toward change

If all goes according to plan, Cairo will start looking quite different in the near future. While the building of new cities away from Cairo’s city center and the downtown rehabilitation projects might seem to be pulling in opposite directions, Al Ismaelia Chief Executive Officer Karim Shafei feels that there is room for both movements to succeed.

“Has New York been abandoned by everybody just because of suburban Jersey? No. There is somebody who wants to live in the suburbs and somebody who wants to live in the cities,” he says. Despite reports from developers of high sales rates in their suburban communities, it remains uncertain as to whether people will actually move out there yet.

“There’s a tremendous inefficiency in the whole supply and demand of these things,” says Max Rodenbeck, The Economist’s Cairo correspondent and author of “Cairo: The City Victorious.” In the book “Cairo Cosmopolitan,” contributor Eric Denis writes that toward the end of the 1990s and early 2000s, 600,000 upper-end residential units were being constructed in Cairo for a middle and upper class that did not exceed 315,000 families.

Egyptian buyers using real estate as an investment can explain some of this. With a population growing at a rate of more than one million every year, many think real estate prices will continue to rise. “You’re not buying that villa for yourself, you’re buying it for your three year-old daughter,” says Diane Singerman, a professor at Washington DC’s American University and the editor of “Cairo Cosmopolitan” and “Cairo Contested.” Downtown’s rejuvenation projects remain an untested innovation in Egypt.

“There is very little history or experience with gentrification in Cairo. It tends to be decay and rebuilding.  So in some ways, this attempt to revive downtown Cairo — it’s a unique experience in Egypt and hasn’t happened before,” says Rodenbeck. “It will probably be something that’s a little bit whitewashed if it works at all, but I think it may rescue downtown from a worse fate,” he says. If both the downtown and desert projects are to be successful, Cairo will need to upgrade its infrastructure, quickly.

“If they don’t do something about transport — something really quite radical — and invest enormously in, say, the subway system, it’s going to be a rather odd-shaped city and not very functional,” says Rodenbeck. Cairo will stay the same for a little longer, at least, as all of the plans afoot will take some time to bear fruit.

“I don’t think 10 years is enough time to flip Cairo around,” says Shafei.  “Nevertheless, I think that the old central parts of Cairo will change tremendously over the next 10 to 15 years.”

Only time will tell what becomes of Cairo. To be successful, these projects will need the continued support of the Egyptian government and foreign investors. The economy will need to continue expanding to keep demand up. And in Egypt, such things can never be taken for granted.

“This attempt to revive downtown Cairo – it’s a unique experience in Egypt”