Abu Dhabi’s futuristic vision of an Egyptian metropolis

UN Habitat/YouTube

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By 2052, Egypt’s Ras El Hekma will be “competing with the most important cities of the world,” according to the new project’s promotional video.

Published on February 23, the day the Abu Dhabi sovereign wealth fund ADQ bought development rights to this stretch of coastline as part of a $35 billion deal, the video shows shots of a CGI metropolis “in the heart of the world’s most beautiful beaches, between clear sea and soft sands”. 

The narrator tells us that the city will host factories, farmland and concert halls, run on clean energy, create millions of jobs and become “one the most important tourism destinations on the Mediterranean Sea and in the world”.

Yet a month since ADQ signed the biggest foreign investment deal in Egyptian history, the fund has released little more than a vague 500-word press release to explain how it intends to achieve these goals. 

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The first tranche of the $24 billion ADQ offered for development rights — the remaining $11 billion consists of existing Emirati deposits in the central bank that the fund will invest in “other prime projects in Egypt” — has been transferred, suggesting that a plan is in progress. 

But having bought an area roughly the size of Washington DC at relatively high market prices, what ADQ plans to do with it remains up for debate.

Yahia Shawkat, urban researcher and co-founder of the Cairo-based research centre 10 Tooba, believes that the eventual project may look very different from the plans that have been published, which appear to be based on a prior proposal drawn up by the Egyptian government and UN Habitat at least four years ago.

They show “a kind of advertisement,” says Shawkat. “It’s a promotion for the land, for what you can do with it as a potential buyer or developer.”

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Shawkat believes that ADQ has already scrapped this proposal and is conducting negotiations for a new plan that will see the fund become a “master developer”, responsible for providing basic infrastructure whilst selling on development rights for subdivided land plots.

“A lot of real estate developers will be involved,” he says. The land is “too big for ADQ to develop itself”.

Mirroring Marassi?

The completed project may resemble a larger Marassi, a luxury tourist resort further along the coast.

Since 2006, Dubai’s Emaar Properties has invested more than $3.5 billion across 6.5 million square kilometres on hotels, residences, an 18-hole golf course, and Egypt’s largest marina. 

Almost 20 years after construction began, Emaar continues to sell chalets and villas in Marassi for between EGP 5.5 million ($117,000) and EGP 46 million ($977,000).

Following this model, Shawkat suggests, Ras El Hekma could “last a good 20 to 30 years before it dries up”.

Having spent 7 percent of the UAE’s GDP on the deal, ADQ is entering a crowded real estate market.

Under President Abdel Fattah al-Sisi, the Egyptian government has expanded a decades-long policy of constructing desert development, aiming to complete 38 new cities by 2050. This includes the proposed tourist hub of New El Alamein, just 55 km east of Ras El Hekma and similar in size and scope.

According to Ahmed Hemmat, head of project and development services at real estate consultancy JLL, “the probability of market saturation in Egypt remains low in the near term”.

Despite long-standing fears of a property bubble, he says that “the Egyptian real estate market demonstrates a remarkable resilience, underscored by a genuine demand for housing that persists despite the existing supply gap”.

Details of how the land will be exploited, and how revenues and responsibilities will be shared with the Egyptian government, which maintains a 35 percent stake in the project, have not yet been made public. 

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Plans remain vague

Both parties say they are targeting $150 billion in total investment, although the origin of this number and the role this money would play is unclear. 

There is also uncertainty surrounding the fate of the few thousands Bedouin olive farmers who currently occupy the land. Likewise, it is unclear where the new city will get its water; although analysts suggest that desalination may be the only viable source, despite the high running costs involved. 

Whether responsibility for building and maintaining desalination plants — and other similar infrastructure projects — falls to ADQ or the government is also unknown. 

“If it’s a clear investment deal and you have clear revenue streams, then why the secrecy,” asks Maged Mandour, a political analyst.

Mandour sees the deal as more of a “rescue package” to stabilise Egypt; how the fund plans to recoup this investment could be an afterthought.

Two years into a deepening foreign liquidity crisis, ADQ’s investment has allowed Egypt to devalue the pound and receive pledges for $23 billion in multilateral funding that have led ratings agencies to upgrade its economic outlook almost overnight.

From a political standpoint, ADQ’s cash injection looks like a success. But, “from an investment perspective,” Mandour says, “there is good reason to doubt it.”