Social Housing: Promises, Law, and Application

Thursday, 1st September 2016

By Julian Nabil

Egypt has long been subject to many housing difficulties, especially with the increase of informal and hazardous areas that have fostered due to the shortage of affordable housing. With an expanding population, which has tripled since 1960s, the country was catapulted into an urbanization crisis, creating major pressure on the housing capacities of major cities, mainly Cairo.

A significant percentage of Cairenes live in informal settlements, which have massively proliferated since the 1950s, according to estimates by Cairo urban planning expert David Sims. An official study by the United Nations Development Program (UNDP) showed that the unplanned housing areas have become home to one million of Cairo’s inhabitants. Many of these settlements are often dangerous, and some have collapsed, such as the infamous 2008 rock-slide incident in Mansheyet Nasser, which killed over 100 residents.

As discontent with the housing crisis grows, providing social housing becomes a matter of concern for President Al Sisi’s government, which recently set a timeline for the implementation of its social housing program.

On 13 August, Al Sisi announced in a press conference that the completed social housing units will reach the one-million mark by 2018 and a total of 150,000 new units will be available for reallocation of the people residing in informal settlements, to resolve the informal housing problem.

Al Sisi previously noted that the resettlement of informal housing residents and the removal of the informal settlements would cost an estimated EGP 14 billion ($1.58 billion).

A 656,000-unit social housing project will be implemented at a total cost of EGP 97 billion, Minister of Housing, Utilities, and Urban Communities Moustafa Madbouly announced.  The project will be carried out through two phases, the first of which will see the establishment of 256,000 units at a total value of EGP 37 billion and is expected to be finalized by the end of 2016. The second phase will see the building of 400,000 units with a total investment of EGP 60 billion.

On another note, Prime Minister, Sherif Ismail said that the ministry implemented a total of 180,000 units by June 30 as part of the first phase. Approximately 31,000 units are expected to be completed by September 30 this year, and 45,000 units by December 31.

Due to the overarching lack of regulation of the Egyptian housing market, among many other problems, the government has set and amended laws, in an attempt to support the application process and ensure social justice among all citizens applying for housing units.

New Laws and Amendments

The Egyptian Cabinet recently approved three new terms within the new social housing program, following the approval of the Social Housing Fund Management Council.

The first added term is to offer 6,000 two- and three-bedroom units within the social housing project, as the first phase, up for lease for citizens with monthly income of less than EGP 1,500. The maximum limit of the rental period of any residential unit is a non-renewable seven-year period, by mutual agreement of involved parties. The same residential unit can be leased for another period only at the rental market value.

In case of a large applicant turnout to the program, priority shall be given to residents of unsafe settlements that are scheduled to be developed over the next two years, followed by single female breadwinners, people with special needs, large families, families with children, married couples, and bachelors.

The applicant will sign a written declaration committing them to the use of the unit for residential purposes, and to live in it on a regular and permanent basis during the term of the lease, as well as to pay the monthly maintenance and rent. If the tenant breaches the agreement, the unit will be withdrawn from the citizen, who will have to pay the appropriate compensation, and the unit will be returned to the Social Housing Fund. The subsidized rent for the seven-year lease term ranges from EGP 27,300 up to EGP 66,000, depending on the number of units.

As for the payment system, the citizen should pay the electricity, water and gas bills worth EGP 3,000 and the monthly consumption value, in addition to the value of three-month rent in advance, which amounts to EGP 3,900 for the two-bedroom units, and EGP 4,250 for the three-bedroom units.

The subsidized monthly rent is EGP 300, including EGP 25 for the maintenance of the two-bedroom units, and it increases by 7% per annum. The rental market value for the unit ranges between EGP 600 and 800 per month, depending on the location and the city. For the three bedroom units, the tenant shall pay EGP 410, including EGP 35 for the maintenance, where its market value ranges between EGP 800 and 1,200 per month.

The tenant has the right to apply for ownership of the unit during the lease term or a month before its expiration. If the applicant meets the terms and conditions of the mortgage fund, a lease contract can be set, under which the tenant shall be committed to using the unit for residential purposes only over five years from the date of possession.

As for the second term, the Housing Minister stipulated that the units are available for individuals with EGP 2,500-4,000 net income per month, and families with EGP 3,500-5,000 net income per month. Applicants can benefit from the Central Bank of Egypt’s initiative to get a mortgage loan with an 8% declining interest rate over 20 years, and there is no cash support from the mortgage fund for that category.

The applicants within such category should have a maximum age of 55 years, and should not have previously purchased a subsidized housing unit. The down-payment is 25% of the unit value, to be paid in four quarterly installments, determined according to the level of income, the customer’s credit history, and the Mortgage Finance Fund review

The third term of the program stipulates that 20,000 housing units will be delivered for trade unions as a first phase, within one year of receiving the applications. The number of units will depend on the advance payments made, and only offered in the case of availability of remaining units from previous announcements.

The unions will make an internal announcement of unit availability with the conditions and required documents, as well as collecting the down-payments from serious applicants to be transferred along with the documents to the Housing and Development Bank. The bank will then review the data provided by the trade unions to ensure the applicant’s eligibility for the units.

Application Process

Currently, one of the major social housing projects in Egypt is Dar Misr, which was launched by the Ministry of Housing in November 2014. The first phase of the project will include 30,000 residential units to be located in New Cairo, New Damietta, 6th of October City, Shorouk, Obour City, 10th of Ramadan, Badr, and Sadat cities. The total number of residential units targeted in the entire project is 150,000.

Reservations of the units are made through the branches of the Housing and Development Bank. Applicants should pay 10% of the unit value in advance when reserving, and another 10% when selected on a lottery basis. The unit’s remaining value can be paid through paying quarterly installments over four years, with each installment constituting 5% of the unit value. The other payment method is through the Central Bank of Egypt (CBE) mortgage initiative, if the value of the unit is less than EGP 400,000.

Located in Southern Moqattam District, Al Asmarat is a another social housing project divided into three phases and created specifically for residents of hazardous informal settlements, notably the Doweiqa area of southeast Cairo, Dar El Salam, Ezbet Khairallah and Stabl Antar.

The housing project will deliver approximately 16,000 fully serviced units for citizens who live in such informal areas for free and without any administrative procedures. Applicants should only submit a national ID and a statement of marital status to prove their entitlement to the units, which are provided under the usufruct system.

The Social Housing Project was first announced in 2011 to provide residential units for low-income citizens, and received around six million applications requests by August of the same year. However, the project was halted due to data loss, and was later re-launched in July 2014, with a plan to be finalized in five years and deliver approximately 200,000 units per annum.

Serious applicant should pay EGP 9,000 in advance to the Housing and Development Bank to reserve the housing unit. The government has announced that the 90 square meter apartments will be available for citizens aged 21 years old and above, and with minimum incomes of EGP 1,000 per month, while the maximum income for families and individuals was set at EGP 3,500 and EGP 2,500 per month respectively.

Residents should pay a monthly installment starting from EGP 350 over 20 years under the CBE’s mortgage finance system, with an annual declining interest of 7%. Residential unit prices were initially listed at 135,000 until May, but appreciated to EGP 154,000 due to the pound devaluation.

As a key aspect to the country’s long term stability and economic welfare, the government has prioritized resolving the issue of social housing. Through these initiatives, the state sought to address issues such as ensuring the delivery of homes to those who need it most, uncontrolled housing prices, and reducing hazardous areas.  As many citizens are looking for quick results for the housing issue, the government has taken significant leaps to improve the housing situation for low-income families.

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