Top Arabtec executives flew to Egypt yesterday in a last-ditch attempt to salvage a US$40 billion deal to build a million low-cost homes in Egypt.
The chairman Khadem Al Qubaisi was among those making the trip to Cairo for a series of last-minute negotiations with the Egyptian housing ministry surrounding stalled plans to build affordable homes on 13 sites across the country.
Arabtec shares fell 0.68 per cent yesterday to close at Dh2.93, a fourth day of declines after the Egyptian newspaper Al Masry Al Youm had reported that the project had been put on hold after Arabtec failed to meet conditions imposed by the government to start work.
The newspaper cited general Kamel Al Wazir, head of the Egyptian army’s engineering division, who said that the project was no longer going ahead.
“The problem is with the financial details,” a source close to Arabtec said. “Arabtec officials spent a week in Egypt on February 22 and thought they had reached an agreement. But when the contract arrived it was different from what they had agreed.”
Last November Arabtec reported that it would start construction on a first phase of 120,000 homes in the cities of Obour, Badr and New Minia after it agreed a deal to offer the New Urban Communities Authority completed homes in place of payment for the land.
“The company will not sell vacant land but affordable housing units, then it will deliver public services’ buildings to the Urban Communities Authority, who will in turn transfer their ownership to the concerned authorities,” Khaled Abbas, Egypt’s assistant housing minister for technical affairs, said at the time.
But, UAE-based sources claim that the Egyptian housing ministry is now demanding to be given more housing units than originally agreed.
An ultimate decision over the highly political project, however, is likely to rest with the UAE and Egyptian governments rather than company bosses.
The deal, believed to be the largest housing project in the world if it goes ahead, was announced by the Egyptian president Abdel Fattah El Sisi in March last year before he came to office, and has been viewed as part of a package of aid which the UAE has provided to Egypt after the former president Mohammed Morsi was removed from power in 2013.
“The problem is not with Arabtec,” the source said. “The problem is with Egyptian politics. People there are afraid to sign a paper and be judged by society for giving the land away too cheaply. But Arabtec cannot afford to pay them what they want.”
Arabtec launched a recruitment campaign for the massive project last year, and is understood to have already filled a number of senior positions as well as appointed an architect and building consultants.
Building work on the first phase is already behind schedule. Construction was due to start in the third quarter of 2014.
Arabtec declined to comment on the negotiations. Calls to the Egyptian housing ministry yesterday were not answered.
“This contract is a big part of Arabtec’s backlog. Since the deal was signed we don’t have much visibility on the terms,” said Sebastien Henin, head of asset management at The National Investor.
“Even though there is a strong political angle to this deal, Arabtec is not a charity and will have to make profits and if the deal goes ahead then Arabtec will eventually have to make the terms of the deal public.”
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