Partnership between the Public and Private Sectors in the Real Estate

The partnership between the public and private sectors constitutes one of the most significant legal and economic mechanisms aimed at enabling the State to implement infrastructure and public service projects with greater efficiency and a lighter financial burden on the public budget.

In light of the accelerating economic developments and the growing social demand for public services, it has become necessary to explore new contractual models that allow for the utilization of the private sector’s capabilities in financing, management, and operation, without compromising the supervisory and regulatory role of the country in ensuring the public interest.

Egypt has adopted this approach through the promulgation of the Public Private Partnerships Law No. 67 of 2010 “The PPP Law” Regulating the Participation of the Private Sector in infrastructure projects, public utilities, and services. This law established the first legislative and institutional framework governing partnership contracts, defining their scope, the procedures for their offering, the rules governing their conclusion, and the competent authorities responsible for their implementation and oversight.

Prior to the enactment of this law, the concept of public-private partnership (PPP) was unfamiliar to the Egyptian legal system. The country relied on traditional models for executing public projects, such as Direct Administrative Contracts, Concession Agreements, or Public Works Contracts.

As the need to develop public utilities increased, a modern legal framework became necessary to overcome the limitations of these traditional systems and to allow private sector participation in the financing, construction, operation, and maintenance.

Accordingly, Law No. 67 of 2010 and its Executive Regulations issued by Prime Ministerial Decree No. 238 of 2011 were promulgated to establish a new, flexible contractual system responsive to the requirements of economic development.

The Egyptian legislator was keen to provide a precise definition of the concept of partnership. The law defines the PPP system as every contract concluded between an administrative authority and a private legal entity, under which the latter undertakes the financing, design, construction, operation, and maintenance of an infrastructure or public utility project for a specified period, provided that ownership of the project reverts to the State at the end of the contract term.

The Legal Framework Governing PPP:

Law No. 67 of 2010 regulating the participation of the private sector in infrastructure projects The PPP Law defined its scope of application in Article (2), which stated that:
“The administrative authorities may conclude Partnership Agreements under which the project company shall finance, construct, equip, and make available infrastructure projects and public utilities or finance and develop such facilities, while maintaining what has been constructed or developed and providing the services and facilities necessary to render the project fit for regular and continuous production or service delivery throughout the contract period.”

This provision naturally encompasses Real Estate projects related to public utilities, such as:

• Middle Income and social housing projects.
• The development of unplanned and slums.
• New urban communities and real estate infrastructure projects (water, sanitation, electricity and roads).

Article (2) of the PPP Law also determined the timeframe and financial threshold for partnership contracts, providing that: “The duration of the Agreement shall not be less than five (5) years and shall not exceed Thirty (30) years from the date of completion of the construction and equipping works or the completion of the development works, and the total value of the contract shall not be less than one hundred million Egyptian pounds.”

As an exception to the time limitation, the law allows the conclusion of a partnership contract exceeding thirty (30) years if this is required by an essential and overriding public interest, based on a recommendation by the Higher Committee for Partnership Affairs, formed by a decree of the Prime Minister.

The Authorities Regulating the Partnership System:

Article (16) of the PPP Law stated that “A special unit shall be established within the Ministry of Finance under the name ‘Central Unit for Partnership,’ whose composition and chairperson shall be determined by a decree of the Minister of Finance. The Executive Regulations shall define its relations with other State bodies, its administrative and financial structure, and its work systems, employees, and remuneration without being bound by prevailing governmental regulations.”

“The Central Unit for Partnership shall be responsible for providing technical, financial, and legal expertise to the Higher Committee for Partnership Affairs and to the partnership units within administrative authorities. It shall also oversee and monitor the procedures for tendering, concluding, and executing partnership contracts, and prepare and publish studies, information, and statistics related to partnership projects at both the local and international levels. Moreover, the Unit shall be in charge of selecting and contracting with transaction advisors for partnership projects in accordance with the rules and procedures set out in the Executive Regulations.”

Forms of PPP in the Real Estate Sector:

Joint Development: Under this model, the State grants land or rights in land in exchange for its development or the provision of residential or service units, with revenue-sharing arrangements or allocation of units serving public purposes. The contract must specify mechanisms for delivery, quality standards, revenue distribution methods, and guarantees.

Build–Operate–Transfer (BOT): In this form, the private sector undertakes the construction of the project and its operation for a specified period, after which ownership is transferred back to the administrative authority.

Concession for Investment: This involves granting the right to use or develop land or property for a specified term, subject to conditions for restitution and compensation in cases of negligence or failure to perform.

Contracting and Offering mechanism:

Pursuant to Article (20) of the PPP Law “Contracts for projects implemented under the public-private partnership system as provided in Article (2) of this Law shall be concluded by way of public offering or auction, in accordance with the rules and procedures set out in this Law and its Executive Regulations.”

Exceptionally, contracts may be concluded by one of the following ways after obtaining the approval of the Higher Committee for Partnership Affairs, upon request of the competent authority, and based on the recommendation of the Central Unit for Partnership—in the cases indicated below:

1. Limited Tender or Auction:

Where the nature of the project requires technical competence and financial capability available only among specific entities.

2. Direct Contracting:

• Where the State’s need for the project does not permit the use of public or limited tendering or auction procedures, and where there exists an immediate economic or social necessity requiring its expedited implementation.
• Where a project company has efficiently completed a previous PPP project, and the Higher Committee for Partnership Affairs, taking into account the State’s economic and social circumstances and the specific nature of the project, and based on a recommendation from the Central Unit for Partnership, approves direct contracting.

3. Contracting for a project initiated by the private sector:

Where a project is proposed by a private entity, is innovative, financially complete, and beneficial to the State economically or socially, and was not previously planned by the administrative authority at the time of submission.

Substantive Provisions of PPP Agreements:

Article (34) of the PPP Law identifies the key provisions and clauses that must be included in partnership agreements, particularly the following:

1. The nature and scope of works and services to be performed by the project company and the conditions for their execution.
2. Ownership of project assets and properties, the parties’ obligations regarding the delivery and receipt of the project site, and the provisions governing transfer of ownership at the end of the project.
3. Responsibility for obtaining licenses, permits, and approvals.
4. Mutual financial obligations and their relation to the method of financing.
5. The sale price of the product or the service fee and the bases and rules for their determination and adjustment (increase or decrease), including mechanisms for addressing inflation rates and interest rate changes, where applicable.
6. Quality assurance mechanisms and systems for financial, administrative, and technical supervision and monitoring of the project’s operation, utilization, and maintenance.
7. Regulation of the administrative authority’s right to modify conditions of construction, equipping, maintenance, operation, and exploitation, and the principles and mechanisms for compensation resulting from such modification.
8. Types and amounts of insurance related to the project, operational and exploitation risks, performance guarantees issued in favor of the administrative authority, and the provisions and procedures for their recovery.
9. The principles governing the allocation of risks associated with legislative changes, unforeseen events, force majeure, or archaeological discoveries, and the corresponding compensations, as applicable.
10. The contract duration, cases of early or partial termination, and the related rights of the parties.
11. The cases in which the administrative authority may unilaterally terminate the contract and the financial obligations arising from the exercise of this right.
12. The rules governing restitution of the project at the end of the contractual term or in cases of unilateral, early, or partial termination.

In light of the foregoing, Law No. 67 of 2010 has established a comprehensive legal framework regulating the partnership between the public and private sectors, enabling the State to benefit from the private sector’s resources and expertise in financing, implementing, and operating infrastructure and public utility projects. This naturally extends to real estate projects of a service-oriented or developmental nature.

This law represents a significant advancement in the development of the Egyptian legislative environment, as it has allowed the State to shift from the role of the sole financier and executor to that of a regulator and partner—consistent with the requirements of modern urban development, particularly in large-scale real estate projects requiring substantial financing, advanced technology, and efficient management.