CAIRO: Palm Hills Development Chairman and CEO Yasseen Mansour has offered to pay LE 272 million as a “compensation for lost revenue” in the case brought against the firm charging officials with squandering public funds in a land deal.
During the current ongoing arrests and investigations of former government officials and top businessmen, Mansour has had charges brought against him along with former housing minister Ahmed El-Maghrabi.
Both Mansour and El-Maghrabi are being charged for purportedly corrupt land deals.
“The negative news flow that the companies are receiving will put a dent in people’s confidence in the sector and obviously have an impact in their stocks going down,” Naeem Brokerage senior investment analyst Hisham Halaldeen told Daily News Egypt.
Pressure on valuations will increase and the validity of deals could possibly be questioned, he added.
Charges include El-Maghrabi obtaining land at a cheaper rate in the Sixth of October City and later transferring the land to Palm Hills.
Palm Hills was founded by The Maghraby Investment and Development Company, a joint venture between the Maghrabi and Mansour family businesses.
There is also another case filed to indict Palm Hills on a 960,000 sqm land sale contract, which an Egyptian legal panel ruled that the state land sale between the New Urban Communities Authority and Palm Hills was illegal and ordered it scrapped.
The offer from Mansour comes as a solution to give back the money Palm Hills would have had to pay in their land deal instead of having to scrap the sale.
As for the future of the real estate sector, Halaldeen explained that the demand in the sector will change due to the recent events that have occurred in Egypt.
“There is no doubt in the future of the industry, with most of the demand coming from class B/C segment,” he said.
“Most developers were focusing on high end A and B+ class, and we believe their focus will shift to units of less than half million pounds in the future.”
Halaldeen also went on to elaborate that real estate developers, such as the likes of Talaat Mustafa Group, Palm Hills Development and SODIC will most likely see slower sales as well as possible cancellations in the near to medium term.
TMG has faced a similar lawsuit against its purchase of land for the massive Madinaty project.
“The lower sales may lead to lower construction activities reducing the speed of revenue recognition.”
Heliopolis Housing, Medinet Nasr Housing, Namaa for Development and Real Estate have been coined as safer bets of investment in light of the current situation.
“The Egyptian government is yet to pass the law to ratify the lands directly allocated by NUCA prior to 2006, this coupled with investigations to prior land deals could put further pressure on the stocks,” he said.
“A large part of sales of listed developers come from mid- to high-end segment or second-home projects [north coast/Red Sea]. This will be significantly impacted in the short to medium term until confidence is restored in the market.” –Additional reporting by Reuters.