CAIRO: With the influx of high-income Iraqi refugees to the Sixth of October City, the price of residential and commercial property has skyrocketed over the past two years.
Egyptians residents of the flourishing satellite city, 20 km southwest of Cairo, say the real estate market there was first a magnate for middle-class and low-income segments seeking low-income small flats. But with the advent of Iraqis fleeing sectarian violence in their country in 2006, the honeymoon was over: as they came in with their big money and plans to settle down and run a business, the prices shot up.
The City, now nicknamed “New Baghdad, houses thousands of Iraqi refugees, Iraqi bakeries, coffee shops and restaurants serving special Iraqi food. Estimates place the community of Iraqis there at approximately 150,000.
Abu Omar, an Iraqi coffee shop owner in Sixth of October, is planning to expand his business by setting up a cafeteria.
“Iraqis are contributing to solving the unemployment crisis, he told Daily News Egypt, as he gestured towards the 12 young Egyptians working for him.
“The rise in property prices in Egypt indicates an economic boom, said Abu Omar.
But Egyptians at the café fervently disagreed with him. The inflow of Iraqi and Gulf investors to the satellite cities only serves Iraqi and Gulf business which focus mostly on luxury housing rather than productive projects that provide jobs, they argue.
Hussain Abdel Moniem, who has been a real state agent for 15 years, said that he knew an Iraqi who bought a flat last year for LE 80,000 and sold it last week for LE 190, 000.
“He had also bought a supermarket for LE 300,000 that is now worth LE 1.5 million due to cutthroat competition among Iraqis, he added.
Walid Rizk, another real estate agent, confirmed that land and property prices were increasing at normal rates until two years ago when Iraqis came to the area and invested heavily in that sector. A square meter of building land shot up from LE 600 to LE 1,300 and sometimes LE 3,000 in just two years,” Rezk said.
According to Rezk the increase was due to Iraqis purchasing large plots of land and high-rises. “For example one Iraqi bought 14 flats in bulk and made a hefty profit after just one year of leasing them.”
However, many Iraqis blame the price hikes on opportunists and profiteers, whether Iraqis or Egyptians, who exploited the desperate demand of large numbers of rich Iraqis.
In return, as soon as the Iraqis became landlords they did the same, considering the profit margin.
Political and demographic stability in Egypt was the reason behind Iraqi demand to purchase large plots of land at any cost, said Ammar, an Iraqi real estate agent.
But stuck between the deep-seated fear of having to return to their war-ravaged country and the rampant unemployment in Egypt, poor Iraqis were caught between two fires. Yet many opted to settle down in Egypt and live on the little money relatives can send them from home.
It was smoother sailing for more affluent refugees, however, who transferred their cash to Egypt, bought a place to live in and started businesses benefiting from Iraqi newcomers and upper-class Egyptians.
For them pumping their money into real estate was a strong bet considering that Sixth of October City is home to many private schools and universities, with large numbers of Arab students from the Gulf states, who need to rent flats.
Charging them extra money won’t hurt their wallets, said Ammar.
According to Ammar, furnished flats in summer cost roughly LE 1,500 to LE 2,000 per month, while in winter it decreases to LE 1,200.
Tarek Ahmad, an Iraqi landlord, attributed the crisis to the high cost of building materials, as well as capital-intensive labor. So it s your problem, it is not fair to blame us for that, he said.
The 45-year old Iraqi confirmed that rich countrymen are few and the majority of Iraqis cannot afford buying and so they rent.
Ahmad said that when he arrived in Sixth of October City last year, he built his five-storey building at a cost of LE 1 million. He rents out four flats, mostly to students, to cover the cost of construction, but he confirmed that as soon as the situation gets better in Iraq, he will sell the building and go back.
Khairy Zad, who owns a supermarket, said that Egyptian authorities facilitated starting off his business. He recalls how 7 million Egyptians had received the same treatment in Iraq in the 1980s.
The Iraqi government paid them unemployment benefits and helped them till they made a lot of money, said Zad. Iraqis like Sixth of October City because the houses there remind them of their home country, he added.
Ahmad Ibrahim, an Egyptian contractor, attributed the increased cost of housing to a hike in the value of the land itself.
The increase is because of the furnished flats rented by Gulf Arabs, not on the purchase price, said Ibrahim, refuting the idea that the nearby private universities were the trigger.
The increased prices have also taken a heavy toll on the prices of nearby government-subsidized housing set aside for low-income youth. A 70 square meter flat rose from LE 30,000 to LE 70, 000.
Observers argue that the government has exacerbated the crisis by facilitating the sale of Egyptian land to foreigners. This, they say, was not permitted in the past, neither was opening the real estate market to the rules supply and demand.
Radwan Abdel Rahman, an architect who designed many apartment blocks for Iraqis in Sixth of October City, blamed the government for not countering the sudden increase in demand for posh private villas for wealthy Iraqis and Gulf investors, with increased construction of budget housing catering for the low-income brackets.
In 2005 President Hosni Mubarak launched the National Housing Project (NHP) initiative to build 500,000 units for youth and low-income families across the country over the course of six years, a hallmark of his election campaign that year.
More than 20 private-sector companies have signed on to the project, yet nearly two years later, almost no construction has taken place and the few buildings that are complete remain largely empty, said Abdul Rahman.
However Muhammad Demerdash, deputy minister of housing, denied these claims, saying that the ministry is exerting much effort in solve the crisis. “We are building housing projects for the lower-income brackets, as well as putting plots of housing land up for sale by lot.
He told Daily News Egypt that the increase in rent values was because the low supply could not cope with the high demand.
Al-Ahram columnist Salama Ahmad Salama, took that with a grain of salt. In a scathing commentary, he urged the government to encourage Gulf investors – including Iraqi businessmen – to put their money into large-scale industrial projects that generate jobs, instead of focusing on luxury housing that benefits the well-heeled elite.
“Building luxury villas is insane, he wrote. “All it does is reinforce the values of wasteful and ostentatious consumption. It flies in the face of social sensitivity.
