For Egyptian real estate, putting cash into properties, land or simply buying up real estate company stocks traditionally translated into big returns, largely due to the huge gap between supply and the country’s growing population and housing demand.

Over the past several years, investors poured funds in the many large-scale construction projects on the outskirts of Cairo and cities in the North Coast. Egyptians’ desire to escape Cairo’s overcrowded districts led to the success of communities like Al-Rehab City and Sheikh Zayed.

Yet even Egypt’s growing demand could not save developers in the wake of the January 25 Revolution. With the fall of the Mubarak government, the new authorities launched investigations into corruption at the Ministry of Housing and public auction authorities. They found what many Egyptians suspected all along: corruption was rampant in the housing ministry.

The onslaught of court cases suddenly probing land deals, some more than a decade old and on property already being developed, in addition to a dramatic change in consumer behavior made it a tough year for real estate companies. Without an interim government in place and overall supervision, decisions were stalled as many projects struggled to acquire permits, buy new land or start new projects.

In response to highly publicized scandals, many of developers’ stock prices plummeted as foreign investors pulled away from real estate and related sectors. The banking sector also tightened its belt, expecting to be writing off millions of pounds in bad debt.

That being said, real estate insiders were optimistic about positive resolutions to some of the legal disputes, perhaps similar to the Toshka land sale deal between the government and Saudi investors. In April, Kingdom Holding Company (KHC) agreed to give back 75,000 acres of undeveloped land in Upper Egypt. KHC kept the remaining 25,000 acres.

“[T]he most likely scenario regarding land disputes is that they will be settled via a middle path where developers agree to pay additional considerations for their land rather than a worst-case scenario where land purchases are annulled. Also, we expect the focus of disputes to shift to project execution rather than the circumstances of land acquisition,” stated a report issued by real estate analysts at investment banking company HC Securities and Investment.

And at the end of November, that’s exactly what happened for Egypt’s biggest listed developer, Talaat Moustafa Group (TMG). An administrative court upheld TMG’s purchase of 8,000 feddans of land on the outskirts of Cairo, overruling an earlier lower court decision in June. TMG was accused of buying the land directly from the New Urban Communities Authority instead of bidding on it in a public auction. Since 75% of the land has been developed or is under development, only the last quarter will be subject to revaluation.

But even before the decision was handed down, it seemed there was some good news on the horizon. As Egyptians grew used to the uncertainty playing out on streets, demand for buying new property returned. The latest proof came from the sellout of SODIC’s Westown Residences, a gated residential property on the Alexandria-Cairo Desert Road.

There were other positive signs as developers like TMG proved they could make new sales, despite unrest and remaining under the shadow of controversial court cases, although profit margins were still down. TMG’s nine-month sales dropped to LE to 2.1 billion versus LE 2.9 billion the year before.

Other firms used the year to focus on delivering units in their backlog and offer better financing programs to entice consumers and make it easier to purchase property.

While political unrest ushered a new era of uncertainty for the real estate industry, rising inflation and the threat of a weaker pound could push people to invest in property in the near future. In the long run, whether or not the sector is on a solid path to recovery largely depends on whether the new government is able to give the much-needed support firms are looking for to cut the red tape, with enough assurances and checks and balances to prevent the kind of abuses of the past. bt