To have and to hold: New incentives to boost state revenues from informal land holdings

In the government’s latest efforts to catalogue and capitalize on its assets, the outgoing House of Representatives passed a state-drafted law in early July to regulate the legalization of the informal occupancy or use of state land.

At the core of the revisions that were eventually approved are incentives, namely an expansion of the powers granted to governorates and a cash incentive for state employees, to stimulate action at several levels of government to formalize land arrangements.

A joint parliamentary committee reviewing the new bill admitted that the earlier suspended version, Law 144/2017 and its executive regulations, had failed to remedy informal land arrangements. Its report cited several obstacles, including delays in inspections, high fees for assessment and review, appeals being handled by the same committees that made the initial decisions and haphazard or inflated pricing of state land by valuation committees — all of which discouraged citizens from applying to legalize their status.

New provisions in the bill seek to address some of those issues. The revised law will allow governorates to compete with the original state bodies entitled to handle state land.

Employees involved in the legalization process will also be granted a significant share of the revenues generated from land inspections and property assessments — an implicit acknowledgement of the need to motivate lower-level bureaucrats to carry out the work.

The law also requires authorities to accept payment in cases where legalization or repossession is not possible.

The new law, which still requires presidential ratification and publication in the Official Gazette to take effect, also introduces a notable shift in the pathway that revenues from land legalization will take. Instead of falling into the pocket of state agencies with titles to the land, revenues will now be directed instead to the state treasury — part of a broader push to centralize revenue collection.

While the law bolsters the role of governorates and executive bodies, it also grants the president expanded oversight over legalization and demolition decisions. It maintains, however, a key condition from the 2017 law: prior approval from the Defense Ministry remains a prerequisite for any legalization to proceed.

Ministries vs. governorates

People or entities using or occupying state land informally are able to apply to legalize their status. Under the new provisions in the law passed in July, if the competent administrative authority fails to act on legalization requests within six months of the submission deadline, the governorate in which the land is located can take over and lease or grant usufruct rights to the informal occupants.

The step effectively recognizes that some administrative bodies have failed to make progress on legalizing land holding, prompting the state to introduce the role of governorates as competition in order to spur faster action, a member of the House Planning and Budgeting Committee told Mada Masr on condition of anonymity.

This shift also serves the financial interests of governorates. Under the new law, they are entitled to retain 20 percent of the revenues they generate from legalization, a carryover from the previous legislation, should they take over the process.

According to the source, the law goes further in acknowledging bureaucratic dysfunction by explicitly attempting to incentivize low-ranking employees. Up to 30 percent of inspection fees can be allocated to those tasked with enforcing the law, with spending arrangements to be determined by Cabinet decree upon a proposal from the finance minister.

Past experience made it clear that “many of the employees whose work is tied to this law won’t act unless they receive a cut of the revenues,” the source said. “The law implicitly acknowledges that.”

Security constraints: Revenues come first

Even if informal holdings are not legalized, state authorities are required to collect fees from occupants on state land under the new law.

If legalization is not completed for any reason, or if removal of encroachments is temporarily unfeasible, the administrative authority is still obligated to collect a fee from the occupants, even though they gain no legal claim to the land in exchange for paying this fee.

The law caps the usufruct fee at LE100 per square meter per annum for built-up land, and LE20,000 per feddan per year for agricultural or reclaimed land. Both amounts increase by five percent annually until the informal occupancy is removed.

State authorities often fail to clear encroachments, typically due to security-related concerns, according to the parliamentary source. The law’s new provisions allow for these unresolved situations to persist for extended periods, with neither removal nor legalization taking place. “The state’s logic here is that as long as it wasn’t able to enforce removal, revenue collection takes precedence,” the source said.

Centralizing control over revenues

Article 9 of the new law stipulates that all proceeds from the process, including fees, are to be treated as public funds and directed to the state treasury. Of these revenues, 20 percent must be allocated to the competent administrative authorities that hold legal title to the land. A Cabinet decree, based on a proposal from the relevant minister, will determine the procedures, purposes and limits for disbursing these allocations.

This marks a departure from the previous law, which had treated land legalization revenues as a direct resource for the authority holding legal title. Under the previous system, the same rules for allocation and disbursement applied, but with proceeds remaining under the administrative body’s control rather than the state treasury’s.

Defense Ministry has final say

Any transaction involving state-owned land must still get the Defense Ministry’s sign-off under the new law, “in accordance with the conditions and rules required by national defense affairs” — nearly identical language to the 2017 law.

MP Mohamed Badrawy, a member of the House Planning and Budgeting Committee, explained that this clause exists because most informal land occupancies take place in remote areas such as the desert, which often fall under the Defense Ministry’s jurisdiction.

However, a member of the Cabinet’s Advisory Committee on Macroeconomics criticized the clause. The Defense Ministry engages in profit-driven investment activities through its Land Projects Organization, they said, making it a market player. “That disqualifies it from acting as a ‘referee’ — a role the law currently permits — even if the language of the law frames it in terms of national defense requirements.”

“Conflict of interest is clear here,” the source noted.

A supervisory role for the presidency

The process of land legalization, from application to resolution, is to be overseen by the State Land Recovery Committee.

While the 2017 law did not formally assign any role to the committee, Wafiq Ezzat, deputy chair of the House Local Administration Committee, noted that it had been overseeing the legalization process during that period based on its internal mandate.

Established by a 2016 decree, the committee is responsible for cataloging unlawfully seized land, reclaiming it through legal means, identifying debts owed to land-holding authorities and classifying debtors, coordinating and following up with land-holding authorities on legal and administrative recovery procedures as well as ensuring the state receives its dues, in whatever form, under the laws governing each authority’s jurisdiction.

What’s new, however, is that the committee should also produce quarterly reports to be submitted to the president on the performance of relevant administrative bodies.

The law introduces presidential supervision “because the situation now, where multiple administrative entities are operating in parallel, creates a need for the presidency’s role as an arbiter,” Ezzat said.