Egypt’s Developers Pay the Price for Ties to Mubarak’s Regime

The Egyptian revolution that swept Hosni Mubarak from power threatens to hobble the real-estate developers that profited from their ties to the former president.

Talaat Moustafa Group (TMGH) and Palm Hills Developments SAE, the biggest publicly traded builders by assets, have already suffered legal defeats that may force them to give up land they bought cheaply from the old regime. Now the caretaker government, under pressure from the public to clean up the industry, is trying to settle disputed transactions without scaring off investors.

“The main challenge is to avoid putting off private investors, who make up 90 percent of the Egyptian property market,” said Ahmed Badr, head of Middle East property research at Credit Suisse Group AG in Dubai.

When Mubarak was toppled in February, real-estate companies lost the government allies who had shielded them from court decisions challenging land purchases. Two former housing ministers and a tourism minister have since been jailed for squandering public funds. On April 7, the public prosecutor ordered the arrest of Magdi Rasekh, chairman of Six of October Development & Investment (OCDI) Co. The company, known as Sodic, is the country’s No. 3 developer.