Arabtec has confirmed that it has finally reached a deal with the Egyptian government to begin the first phase of a US$40 billion project to build 1 million homes in Egypt.
Dubai’s largest listed builder said that the Egyptian government had given the green light to start work on its long-awaited plan to build 100,000 low-cost homes in the cities of Obour and Badr to the east of Cairo.
In a bourse statement on Thursday Arabtec, which is 36.11 per cent owned by Abu Dhabi government fund Aabar, said that it would be signing the final contract to build the homes with the new urban authority of the Egyptian ministry of housing “at the earliest opportunity”.
“The company confirms that it puts Egypt’s project among its top priorities as it is of great importance since it is considered one of the largest projects in the region,” Wassel Al Fakoury, the Arabtec group general counsel and a board member, said in the statement issued on the Dubai Financial Market website.
Ambitious plans spread across 13 sites were first announced a year ago by the Egyptian president Abdel Fattah El Sisi, with construction originally scheduled to start in the final quarter of 2014, taking just five years.
The deal was widely regarded as part of a broad package of funding from the UAE government aimed at maintaining stability in the region in the aftermath of the Arab Spring.
But talks stalled over the number of units to be provided in lieu of land payments amid reports in the Egyptian press, which speculated that the project was no longer going ahead.
However, top Arabtec executives travelled to Egypt last month in an attempt to get the high-profile project back on track before the country’s Egypt the Future conference in Sharm el Sheikh.
Arabtec did not disclose how many units it had finally agreed to give the Egyptian government nor how it would fund the project.
Shares in Arabtec which had been losing ground, enjoyed a boost on Thursday, rising 5.2 per cent in trading to close at Dh2.41 as investors cheered the development. The wider DFM General Index gained 2.3 per cent. Year to date, the Arabtec stock is down almost 18 per cent.
However, many analysts remained cautious on the outlook for the company, which last month reported a surprise Dh94.4 million loss for the final quarter of 2014 as expenses ballooned after a company-wide restructuring following the surprise departure of the chief executive Hasan Ismaik.
“There is no doubt that the news today is positive for Arabtec,” said Sanyalak Manibhandu, research manager at National Bank of Abu Dhabi.
“However, even with the Egypt news it is not enough to change my mind that the stock is still too expensive. The lesson we should all take from the last nine months is that valuations do matter and we have had too little information from Arabtec about how much money they will make from this project,” he added.
Analysts have pointed out that to build one million homes to the five-year time frame, Arabtec originally proposed the company would need to complete about 16,666 homes a month, or 555 homes a day.