CAIRO: A surprise court ruling that threatens Egyptian real estate firm Talaat Moustafa Group's (TMG) $3 billion flagship development has kindled worries about investing in Egypt's property sector. The High Administrative Court on Tuesday upheld a ruling to scrap a land sale contract for TMG's Madinaty project citing a 1998 rule which said there must be public auctions for state property sales. The New Urban Communities Authority (NUCA), a Housing Ministry body, had been selling land directly. How the case is resolved could determine the fate of any copycat cases. The engineer behind the Madinaty suit says he raised another over a Palm Hills deal. Here are some scenarios outlined by analysts and others: TMG gets the ruling overturned Legal experts say TMG still has another chance in the courts to cancel that original ruling and keep building its Madinaty project, restoring investor confidence. But it will be tough. TMG board member and Cairo University law professor Hany Sarie El Din said overturning the decision would be "exceptional and difficult, but it was a legal option." Government fixes contract, no terms changed Analysts say it is likely the state will try to make the Madinaty land contract legal without changing its terms. This could be done by pushing new legislation through parliament, retroactively exempting NUCA from the 1998 law. But that would probably take time and there is a parliamentary election due in November. "There might be some legislation along the road changing the rules of the game ... But that would have significant impact on investor confidence," said an analyst who asked not to be named. A long delay could also hurt sales at the project as potential homebuyers await clarity. There may be other legal routes. The cabinet said on Thursday a solution would be sent to Prime Minister Ahmed Nazif within days, news that came a day after it was announced that a committee was being formed to assess the case. "I don't think they (TMG) will pay more money, but it will be just a legal framework, a new legal framework for the project to continue," the cabinet spokesman Magdy Rady told Reuters. TMG pays a fine or additional sum Some analysts and official media have suggested the case could be resolved by having TMG pay a fine or offer additional money based on a re-evaluation of Madinaty's value. But many question whether this would work, as the row is about sale procedures, not price. "Paying more doesn't solve the issue," Naeem analyst Hisham Halaldeen said. Government does a joint venture with TMG One solution suggested by analysts and media is that the government enters a joint venture with TMG which gives the state ownership of the land but allows the company to finish its project and keep the profits. The problem with this solution is that it would likely involve substantial changes to the contract, something both the company and the government have a strong interest in avoiding. Government auctions off unsold land The government could simply auction off all land at Madinaty not already sold, perhaps trying to ensure TMG won the bid. But few analysts expect this to happen because it would probably involve enormous practical challenges and could arouse deeper worries about the future of Egypt's real estate sector. "I strongly doubt their land will be confiscated ... If the government was going to take such action, it would cause a great deal of instability in the investment climate in Egypt," said Beltone analyst Khalid Khalil. –Additional reporting by Ehab Farouk and Marwa Rashad
