Egypt

Several land value capture instruments are used systematically (Table 2.16). Local governments are typically in charge of collecting the payments in cash, but the revenues belong to the regional level (governorates). The low levels of administrative capacities and the inaccuracy of land registry systems are common challenges to implementation.

Egypt is a unitary republic with a three-tier subnational government structure, divided into 27 governorates at the regional level, 187 districts (Markaz) and 91 neighborhoods (Hay) at the intermediate level and 1264 local units and 225 cities at the local level (Law 43/1979). The 4737 villages are administrative divisions subordinated to cities or local units. The 7 economic regions exist for planning purposes (Law 475/1977).

The national government is responsible for the legal framework for land value capture. The country has a complex and overlapping regulatory landscape. Local public entities have little financial autonomy. The national government sets and control their budgets and collects all taxes and charges.

There are four categories of land in the country: public-domain land that cannot be disposed of; state private-domain land that can be transferred, assigned or held privately; private land; and waqf land held in religious trust. Several independent public agencies control state private-domain land and have substantial land banks.

Developers are subject to obligations to obtain approval for new development or development at higher density. The obligations are designed to compensate the impact of development on public infrastructure and services needs and resulting costs. Local governments always charge the obligation and collect the revenues.

Local governments have high discretion in issuing development approvals, but less so in establishing the impact rule or reinvesting the collected funds. Independent public agencies can implement the charge and collect the revenues for projects developed on desert lands, which have a specific legal regime.

The obligation is generally paid in cash before or at the time the development receives approval. The charge is a fixed fee or percentage of land value, varying with the type of development, e.g., residential, commercial or industrial. No exemptions to payment are admitted.

In some cases developers may be asked to provide infrastructure within the jurisdiction, transfer land or donate cash to the local municipality. Sometimes deals were made outside of the legal framework, in which a developer provides infrastructure in exchange of free land. For this reason, the mechanism of issuing building permits against a cash payment has been associated with corruption.

The inadequate legal framework and low administrative capacity at the local level render implementation difficult. Other obstacles to implementation include the risks associated with real estate markets and low-quality land cadastres.

Local governments and development authorities frequently implement charges for development rights and collect the revenues. Local entities need permission from the central government in order to adopt this instrument, specifically from the Supreme Council for Planning and Urban Development and the Ministry of Defense. The charge is levied when developers request to build at higher density or when the government imposes land use changes or building constraints.

The charge is paid at the time the development rights are issued, in cash or through the in-kind provision of public improvements. For instance, in New Cairo, land developers are asked to beautify or add greenery to streets.

The charge is calculated based on the estimated value of extra density or land use change. The actual fee is set as 50% of the incremental value. As such, it may vary across areas or zones of the jurisdiction. It is primarily being implemented in cities where there is demand for building at higher density and the conversion of land uses happens at a significant scale.

Challenges to implementation include inadequate legal frameworks, low demand for building at higher density in many cities, low levels of administrative capacities and the overall low quality of land registry systems. Landowners and developers sometimes file claims against the requirement to pay the charges.

Landowners frequently have to pay a levy for government-built infrastructure from which they specifically benefit, for example public roads, public transport, public utilities and green space. Local governments always implement the levy when they undertake public infrastructure improvements. It is not legally possible form them to recover the land value increases when the national government funds the works. Collection falls under the jurisdiction of each municipal council and the revenues belong to the governorates.

There are variations in how land value increases are estimated. In Cairo, for instance, value increases is calculated on the basis of the land sale value difference before and after public improvement. The fee amounts to 50% of this difference.

The criteria to identify benefitting property owners subject to the levy is physical location. There is a fixed impact radius, based on the type of public improvement or service: 150 meters radius from roads, 300 meters radius from bridges and 100 meters radius from sewage connections.

Local governments often lack the administrative capacity to implement the levy, but also the incentive to do so, since the revenues accrue to the governorate level. Landowners frequently appeal against the requirement to pay the levy, which makes implementation contentious and prone to litigation.

The main purposes of strategic land management are to generate public revenues and provide land for industrial, agricultural and urban development. The four levels of government implement strategic land management operations. 90% of all land in the country is public land, including unused desert land, river and coastal lands, as well as unregistered urban land.

The government acquires vacant or informally occupied land through expropriations from private actors or transfers between public entities. The government can freeze land prices before the announcement of a purchase or rezoning to buy the land before prices go up.

Following rezoning the purchasing entity typically auctions the land to private developers or transfers it without payment to a public entity specialised in land development. These actors will then build public amenities or execute land development projects. The government’s role is to intermediate land transfers in order to facilitate public development.

Although land sales are more common, the national government and local governments may also resort to land leasing. The ground rent is imposed by the national government. Lease length is 50 years at most, varying with the permitted land use, if agricultural, agricultural industrial or urban communities.

In all, land management facilitates public development projects by intermediating land transactions that otherwise would be costly and lengthy. Still, the historically diverse and overlapping types of tenancy and unclear patterns of land occupancy render land transactions contentious and burdensome. Lack of financing for land acquisition, low administrative capacities at the local level and lack of intra-governmental coordination constitute significant challenges to implementation.

Land readjustment is used for urban expansion, urban development and farmland consolidation on a case-by-case basis. The current legal framework, in place since 2008, is never followed. The national and local governments as well as non-governmental organisations make moderate use of this instrument. National, district and local governments collect the revenues.

Publicly-led land readjustment takes place over three stages: selection of areas by the Supreme Council for Planning and Urban Development, in consultation with governors; negotiation between a local public committee and landowners to obtain agreements; and the implementation stage. Even though allowed by law, no private-led land readjustment projects have been conducted so far.

All landowners whose plots are located within the readjustment area must be willing to participate. Participation of landowners is compulsory for projects initiated by public entities and that have a public purpose. If landowners resist land contributions, their land plots are expropriated with compensation.

In slum upgrading, a share of around 30% of the readjusted plots is reserved for public improvements, such as public roads and public utilities. In other types of projects, a different share may be negotiated between landowners and the government. In addition, aland readjustment project typically includes the creation of publicly owned plots that are reserved for future sales, in order to generate revenues.

Landowners receive a plot with an area that is proportional to their original holdings. They may receive a residential or commercial unit instead of their original land plot. They cannot exchange reallocated plots for cash. Owners of small plots are compensated in cash.

Obstacles to implementation include an inadequate legal framework, low administrative capacities, unclear land records and the lack resettlement alternatives for affected tenants and informal residents. High costs of expropriation and resistance from landowners make the enforcement of contributions difficult.

References

[3] OECD (2022), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 13 January 2022).

[8] OECD (2021), “Subnational government structure and finance”, OECD Regional Statistics (database), https://doi.org/10.1787/05fb4b56-en (accessed on 25 November 2021).

[2] OECD (2017), Land-use Planning Systems in the OECD: Country Fact Sheets, OECD Regional Development Studies, OECD Publishing, Paris, https://doi.org/10.1787/9789264268579-en.

[1] OECD/UCLG (2019), 2019 Report of the World Observatory on Subnational Government Finance and Investment - Country Profiles, OECD/UCLG.

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