- Published on 13 July 2024
The long-awaited Construction Violations Reconciliation Law 187/2023, ratified on December 17, 2023, aims to legalize several categories of informal housing and construction across Egypt. Law 187 comes as a major rewriting of Law 17/2019, which was passed barely four years prior, and heavily amended only eight months after it was first ratified. The government has cited how the number of applicants fell significantly short of its estimates, leading to ,much lower collected fees than the LE 100 billion to LE 700 billion some parliamentarians had estimated. The actual amount collected by the end of implementation was closer to LE 18 billion, projected to amount to a total of LE 70-75 billion once instalment payments are collected over several years.
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Despite an estimated 8.2 million units constructed without a permit since 2007, by the final 2021 deadline, approximately 2.9 million applications were submitted for review, representing anywhere between three to nine million units, as one application could include a building with multiple units. According to the Minister of Local Development, 90% of submitted applications were never issued final decisions by the reviewing committees five years after the initial law was passed, with only 6% of applications being approved and 4% declined.
Law 187, along with its accompanying bylaws, published on April 4th, 2024, introduce several provisions that extend the scope of reconcilable violations and address some of its predecessor’s shortcomings. This is a clear indication of the government’s keen attempt at capturing a wider share of potential applicants and collecting more reconciliation fees, as the country struggles under a projected LE 1.2 trillion budget deficit and mounting debt.
However, in the ensuing years between the original applications and this new law, the government has arbitrarily demolished entire neighbourhoods at an unprecedented scale, some of which were explicitly protected heritage sites, displacing and forcibly relocating an estimated 14% of Greater Cairo’s residents to make way for highways and real estate projects. While reconciliation legalizes building violations, those still in the process were not immune from expropriation or demolition where applications to legalize were still undecided.
This development brief analyses the new law’s developments and unresolved obstacles, starting with a summary of the major highlights and then delving deeper into some of these points, specifically added categories of reconcilable violations, new payment schemes, affordability of supporting documents and next steps for applicants under Law 17/2019. The analysis is based on a comparative study of the three versions of the reconciliation law and bylaws, a review of state-sponsored newspapers, and interviews with applicants and lawyers.
Notable Legal Developments Summarized
- A notable legislative development is a major procedural change in the committee’s assessment process. Decision-making committees are no longer obligated to conduct field visits to inspect violations before deciding to accept or reject reconciliation applications. Instead, the assessment process now entails reviewing documents in good faith, without the time-consuming process of a site inspection. The committee can inspect the violation site within five years of approving reconciliation, after which it cannot conduct further inspections or rescind legalization (Bylaws, Article 10). This is expected to significantly reduce processing times.
- Essentially, the new law casts a wider regulatory net to reconcile new categories of building violations that were not allowed under previous legislation. In fact, the head of the Egyptian Parliament’s Committee on Housing went so far as to claim that the new law would allow for the legalization of 80% of all existing building violations.
- Law 187/2023 does not lower reconciliation fees. Instead, more payment schemes are offered, granting discounts, as well as instalment plans of up to five years, the first three years of which are interest-free. Governors are also updating fees across the country from those passed in 2020.
- In terms of the timeline for processing applications, the committee must make its decision within three months of receiving an application. Applicants must submit all necessary documents within 60 days of applying. If additional documents are required, applicants must submit them within 60 days of being notified.
- A crucial, unresolved matter is the allocation of responsibility for applying reconciliation in the case of unlicensed buildings. It is unclear whether the original owner, who committed the violation during the initial construction, or the current owner, who purchased the property without necessarily being aware of the violation, should bear this responsibility.
- Another hurdle for potential applicants is the obscurity of the reconciliation process for individual apartment owners in unlicensed multi-unit condominium buildings. Rather than explicitly addressing the case of single unit owners, Article 10 of the new law alludes to the ability of single unit owners to reinstate basic utilities, in cases where reconciliation is accepted for single applicants. As highlighted by an interviewee, this leaves much room for ambiguity when it comes to the necessary reports and documents, because in cases where a building is in violation, costly reports are usually required to prove structural integrity such as with the core test. This represents a significant financial burden, likely to be unaffordable for the vast majority of prospective single-unit applicants.
Extending the Net of Reconcilable Categories
As outlined in Article 2, Law 187/2023 broadens its scope, making previously irreconcilable violations eligible for legalization. These include heritage-listed buildings (mabani zat qima), construction in heritage protected areas (manatiq zat qima), residential and non-residential construction on tanzim lines (public access routes), and buildings infringing on civil aviation ceilings around airports (Law 28/1981). However, the inclusion of these violations has introduced an additional step for applicants. They now need to obtain additional approvals from relevant state bodies as part of their application, adding further bureaucracy to an already tedious process.
For instance, if the applicant seeks to reconcile a violation in a heritage-listed building, they must secure approval from the National Organization for Urban Harmony (NOUH) (Art.2). Bylaw Article 5 (13) also mandates additional documentation, such as a map from the municipality or other relevant authorities, showing the violation’s location in relation to tanzim lines.
In cases where applicants are legalizing buildings infringing on civil aviation ceilings, they must receive the approval of the Ministry of Civil Aviation and the Ministry of Defense. Bylaw Article 5 (12) also states that applicants must provide a report attesting to the exact measurement of the property’s highest point from the Egyptian Survey Authority or the Military Survey Department and coordinates of the building from the municipality or relevant authority.
According to Article 4, the cabinet can grant reconciliation even if the violation is excluded by the legislation. In these cases, the price of reconciliation can be three times that stated in Article 8. The cabinet also assesses violations in cases when buildings are built outside of designated building zones, which the head of parliament’s Local Development committee, Ahmed al-Segini, stated was necessary so as not to leave the decision at the discretion of “lower-level employees”.
No Reduction in Prices, New Instalment and Payment Plans
One contributor to the underwhelming uptake of Reconciliation Law 17/2019 was the unaffordability of reconciliation fees. Under the new law, the maximum price per meter for the reconciliation fee has in fact increased by LE 500 (to LE 2500), and the application fee ranges from LE 500 to 5000, depending on the size of the violation and the location whether in urban areas and industrial zones or in rural areas. Applicants also continue to have to pay 25% of the total estimated reconciliation fee as proof of intent when applying.
The new law introduces new payment options for the reconciliation fee, notably up to instalment plans reaching up to five years, with the first three years being interest-free (Article 8). The 25% proof of intent fee is considered a down payment for applicants paying in instalments, and the first instalment is collected three months later (Bylaw, Article 12). All instalment plans are paid in equal quarterly payments (Bylaws, Article 12). If opting for a 4-year instalment plan, interest is 5% of the remaining amount (Bylaws, Article 12). If opting for a 5-year plan, interest is 7% of the remaining amount (Bylaws, Article 12). This is an expansion on the 3-year interest-free instalment plan offered by the 2020 Amendment, and still significantly lower than current commercial interest rates of 28.25%.
As for discounts to reconciliation fees, applicants who pay the entire amount within 60 days of being granted reconciliation are eligible for a 25% discount. This privileges applicants with quick access to large sums of money, ergo not low-income applicants.
Supporting Documents
There is also the issue of the unaffordability of supporting documents, particularly the structural report, which under Law 17/2019, could only be prepared by costly syndicate-registered engineering consulting firms. This was addressed in Amendment 1/2020 (Article 7) and is maintained and expanded on in Law 187/2023, which allows syndicate-registered engineers, rather than a consulting engineering company, to prepare structural integrity reports if the violation area does not exceed 200m² and is no more than three floors in height. It is unclear whether this would sufficiently reduce the fee for the structural report. One interviewee pointed out that this would mainly benefit rural applicants, due to the spatial condition, which would render most urban cases of unlicensed buildings ineligible.
Next Steps for Applicants Who Applied under Law 17/2019
Next steps for applicants under Law 17/2019 vary according to the application stage reached. Applicants who are still awaiting the committee’s decision will be referred to the new committees formed under Law 187/2023 and will be subject to the new law, however maintaining the same price per meter as the old law. These applicants will not have to pay proof of intent or application fees again. Law 187/2023 allows applicants whose legalization attempts were unsuccessful under Law 17/2019 or Amendment 1/2020 to reapply and be reconsidered for reconciliation under the new framework.
Continuing its predecessor’s legacy of bureaucratic enigma, the new Reconciliation Law comes with its own set of forms (namazig), indicating the stage of reconciliation the applicant has reached. Namuzag 8 replaces namuzag 10, becoming the single form indicating a failed, rescinded, or successful reconciliation, according to Bylaw Article 12. For applicants with complete and successful applications who are paying in instalments, namuzag 8 is obtained after payment of the whole amount. Namuzag 7 is instead temporarily granted to applicants paying in instalments to guarantee the continuation of state services and amenities, including water, gas, and electricity. Being granted Namuzag 7 under the previous legislation indicated a failed reconciliation application, which might be somewhat confusing to applicants who are reapplying or continuing their reconciliation journey.
Conclusion
After three years of rewriting, the new Construction Violations Reconciliation Law promises to address several hindrances posed under Law 17/2019 and Amendment 1/2020 to improve uptake among potential applicants. However, the practical implications of the new reconciliation law remain undetermined until the new framework is implemented; certain shortcomings are already evident. Mainly, Law 187/2023 does not fully address affordability concerns and instead introduces new instalment plans with interest and a 25% discount for applicants who have the financial means to pay for reconciliation within 60 days of being informed of a successful application.
With the pound’s devaluation and unprecedented inflation, low-income households have seen a significant increase in food spending, rising from 45% to 69% between 2015 and 2020. Basic food prices have soared, with chicken prices up 212% and fava beans up 157% between 2022 and 2024. This is compounded by the removal of subsidies from bread and the expected removal of subsidies from sugar. The new law overlooks the impact of exacerbated economic hardship on low-income individuals’ ability to afford hefty reconciliation fines and other fees while struggling to pay for basic food.
The new Law does not attempt to resolve the question of who is responsible for applying for reconciliation: the original building owner or unit owners. The law fails to offer appropriate recourse for individual unit owners burdened with substantial reconciliation fines and structural report expenses.
The fate of rejected applicants, applicants with rescinded reconciliation for failing to adhere to the payment schedule, and unit owners who have not applied for reconciliation but live in buildings where other owners have successfully reconciled is undetermined. Member of Parliament Ahmed Segini, who serves as the head of the committee on local development, emphasized that the law is voluntary and carries no punitive consequences. Given the state’s history of liberally issuing demolition orders, it remains uncertain whether authorities will refrain from resorting to such measures, especially in light of the estimated 8.2 million construction violations. Sanctioning would come at significant social costs. Based on these early observations, rather than increasing the rate of formalization, the new law may prove more of a hindrance, especially to low income and precarious individuals that do not have the financial resources to pay the fines, or hire lawyers to navigate the increased and complex bureaucracy.
Read more about Egypt’s decades long history with legalizing informal housing