Arabtec Holding in talks with Egypt for joint venture on $40bn low-cost housing project

Arabtec’s deal is viewed as a cornerstone of the government’s bid to provide affordable housing to Egyptians. As many as 16 million are estimated to have inadequate housing.

Arabtec’s deal is viewed as a cornerstone of the government’s bid to provide affordable housing to Egyptians. Above, one of the company’s projects in Abu Dhabi. Silvia Razgova / The National

Arabtec Holding has begun talks with the Egyptian government towards setting up a joint venture project to build a million low-cost homes.

Analysts said such a JV could help Arabtec raise financing from local Egyptian banks for the US$40 billion project.

They also said Arabtec might also go down other avenues to raise funds – including an offering on the Egyptian stock market.

“Arabtec could look into a local listing or listing one of its units in the UAE,” said Allen Sandeep, the head of equity research at Egypt-based Naeem Holding.

“Arabtec is in talks with the Egyptian government, including the ministry of defence and military production, to set up and develop one million residential units,” Arabtec said in yesterday.

The announcement to the Dubai bourse came a day after Egypt's influential defence minister, Field Marshal Abdel Fattah El Sisi, said he was resigning from his military post to run for president. The authorities have not yet set a date for the election.

Arabtec’s deal, believed to be the largest housing project in the Arab world, is viewed as a cornerstone of the government’s bid to provide affordable housing to Egyptians. As many as 16 million are estimated to have inadequate housing.

Shares of Arabtec closed up 1.72 per cent yesterday at Dh5.39. Year-to-date, the stock has risen 106.62 per cent.

Arabtec’s share price did not react significantly to yesterday’s news, as many investors are in “wait and see” mode concerning the execution of the project.

“The size of the project is big, so we have to be prudent,” Mr Sandeep noted.

Kareem Ghaly, an equity analyst at the Egypt-based investment bank EFG-Hermes, said there were concerns over Arabtec’s capacity to execute such a huge contract.

“Such concerns stem from the fact that the company has grown its backlog around 150 per cent over the last three to four months following its Dh22.4 billion Aabar contract,” said Mr Ghaly.

In February, Arabtec signed a deal with Aabar to build about 37 towers in Dubai and Abu Dhabi by 2020.

Mr Sandeep said that investing in Egypt’s low and medium income housing segment is positive, as this segment is still untapped.

Ties between the UAE and Egypt have deepened in recent months. The UAE extended $6bn in support of the Arab world’s most populous country following a revolution and the removal of Mohammed Morsi as president in July.

Saudi Arabia and Kuwait have also extended assistance as Egypt struggles with lacklustre growth and a dearth of investment.

Apart from Arabtec, several other UAE companies have already stepped up their activities in Egypt.

Emaar Properties' Egyptian unit, Emaar Misr, announced last month it would spend up to 6 billion Egyptian pounds (Dh3.16bn) on a residential and commercial scheme in Cairo. The Dubai-based retail group Majid Al Futtaim plans to establish several malls in the country over the next years.

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