Arabtec still in talks with Cairo over $40bn residential project

The construction of the first phase of 100,000 homes, is 'still subject to negotiations'.

Arabtec reported a Dh279.8 million loss for the first quarter of the year. Ravindranath K / The National

Arabtec shares rose 6.6 per cent yesterday on news of the Dubai-listed builder’s ongoing talks about a low-cost housing project in Egypt.

The shares climbed to Dh2.42 after Arabtec said it was still in negotiations with Cairo to commence the first phase of a US$40 billion project to build a million homes.

The construction of the first phase was "still subject to negotiations" with the ministry of housing and "an announcement will be released upon reaching an agreement", Arabtec told the Dubai Financial Market.

“That news was positive,” said Sanyalak Manibhandu, a research manager at NBAD Securities, adding that Damac Properties’ positive first-half net profit helped to improve market sentiment.

“The price of crude also has gone up two days in a row [and] that has helped. It’s a bunch of factors that tells people there is a lot of money on the sidelines.”

The Dubai-based builder has been involved in months of negotiations to begin construction, which includes building 100,000 low-cost homes in the cities of Obour and Badr to the east of Egypt’s capital.

Egypt’s president, Abdel Fattah El Sisi, said a year ago that it would take five years to build homes at 13 sites, with construction originally slated to start in the fourth quarter of last year.

Allen Sandeep, the director of research at Cairo-based Naeem Brokerage, said there remained little clarity on the deal and whether Arabtec would be able to complete the entire project.

“In our opinion, even just the signing of phase 1 could add US$2.5 billion to $3bn to its current backlog,” he said.

The project is widely regarded as part of a funding package from the UAE, aimed at maintaining stability in the region following the Arab Spring protests.

But the talks stalled over the percentage of completed units that Arabtec should deliver to Egypt in lieu of payment for land used in the project.

Arabtec said in April that it was in talks with local and international banks for the financing of the first phase of the project.

It swung to a Dh279.8 million loss for the first quarter of this year from a profit of Dh137.9m for the same period last year.

Arabtec blamed the loss on spiralling costs, with several clients enacting contract clauses, downsizing and reprioritizing projects.

The company, which has been dogged by restructuring issues and a management reshuffle, said last month that several senior staff were leaving as part of a new round of restructuring.

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