Cheaper industrial land push runs into questions over location and cost

Egypt has launched a lease-to-own offering for 540 industrial land plots across 15 governorates, the Ministry of Industry  announced on Monday, with nearly three-quarters of the sites concentrated in its southern governorates.

About 73% of the plots are located in Upper Egypt, according to a review of the offering by Al Manassa, targeting a region where manufacturers say weak infrastructure and high freight costs to primary export ports hinder investment compared with Cairo and the Nile Delta.

The first industrial land offering under the lease-to-own system is designed to cut industrial investment costs by allowing investors to rent land for an annual payment equal to 5% of its value, instead of requiring outright purchase, as the previous system largely did.

According to data compiled by Al Manassa from the Egypt Digital Industrial Platform, Qift and Nag Hammadi in Qena alone account for 202 plots, or 37.4% of the total. New Tiba in Luxor follows with 68 plots, or 12.5%, and New Akhmim in Sohag with 58 plots, or 10.7%.

By contrast, major industrial cities near Cairo and the Delta received only a small share. Sadat City in Menoufiya was allocated just nine plots, less than 2% of the total.

Investors in Upper Egypt have welcomed the lower upfront cost, but others say the geographic distribution, revaluation rules, and financial requirements could limit the system’s appeal.

The land is cheaper, but...

Mahmoud El-Shandawily, head of the Sohag Investors Association, told Al Manassa that renting keeps land costs relatively low for investors. He cited a 1,000-square-meter plot in New Akhmim, Sohag that rents for less than 8,000 Egyptian pounds ($160) a month.

“Instead of putting the money into the land, the investor will build and buy machinery,” he said.

El-Shandawily said the plots are well suited to medium-sized investors, with a large share ranging from 2,000 to 10,000 square meters.

But Mohamed Abu El-Hassan, a member of the Sadat City Investors Association, said that while he supports the lease-to-own system, the distribution of the land was “disappointing.”

Abu El-Hassan told Al Manassa that the distribution “was unfair to investors in Greater Cairo and forces them to go to the provinces or turn to private industrial developers.”

According to the data, Sadat City received only nine plots. The 10th of Ramadan City received 37, New 6th of October City 10, and New Borg El Arab 10.

Upper Egyptian governorates, meanwhile, received the largest share. Qena, Sohag, Luxor, Assiut, and Fayoum together account for about 400 of the 540 plots.

In June, Prime Minister Mostafa Madbouly said that investors in Upper Egypt face challenges including weak infrastructure and high transport costs to ports, and promised a plan to develop the region’s industrial cities and make them more attractive investment destinations.

Concerns over revaluation

Investors’ reservations are not limited to the geographic distribution. The lease-to-own system itself is also raising concerns about the long-term cost of the land.

The annual rent is set at 5% of the land’s price per square meter, with a 10% annual increase. The land is revalued every seven years, and the system can run for up to 21 years.

If an investor opts to buy the land, the rent already paid is deducted from its value. The investor must then pay 25% of the remaining amount upfront, with the balance divided into three annual installments carrying the applicable interest.

El-Shandawily said revaluing the land every seven years could expose investors to unexpected increases in rental and investment costs over the long term.

Abu El-Hassan agreed, noting that investors do not know the final purchase price when the land is first allocated.

“Everything you built could disappear in a moment because there is no clear mechanism for periodic valuation,” he said.

The 50% requirement

Among the provisions Abu El-Hassan considers most restrictive are the financial solvency requirements, which require investors to have bank liquidity covering at least 50% of estimated investment costs, along with credit and debit balances of no less than 10% of the value of fixed assets.

He fears the requirements could exclude serious companies capable of carrying out their projects but unable to demonstrate financial solvency at the ratios specified in the tender documents.

El-Shandawily said supporting investment in Upper Egypt would have required easing those conditions to reflect investors’ financial capacity in the region, particularly since the stated goal of the offering is to reduce investment costs and encourage new industrial projects.

The first lease-to-own industrial land offering therefore presents investors with a trade-off: it gives them access to land without paying the purchase price upfront, but its geographic distribution, revaluation rules, and financial solvency requirements raise questions about whether it can meet investors’ needs across Egypt’s industrial areas.