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ISSN (Print: 2537-0154, online: 2537-0162)

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The Academic Research Community Publication

DOI: 10.21625/archive.v3i2.502

Management Framework for Land Based Financing in Egyptian

New Cities based on the Chinese Model
Mostafa El-Nagdy1 , Hossam El-borombaly2 , Laila Khodeir3
1 Ph.D. Candidate, Department of Architecture, Faculty of Engineering, Ain Shams University, Cairo, Egypt
2 Professor, Formerhead of Architecture Department, Faculty of Engineering, Ain Shams University, Cairo, Egypt
3 Associate Professor, Department of Architecture, Faculty of Engineering, Ain Shams University, British
University in Egypt, Cairo, Egypt

Abstract
Land based financing is a financing approach in which it can provide the needed financing to all urban infrastructure
without depending on the government as the main economic funder or the low-income groups. This financing
approach is based on obtaining revenues from private developers and high-end land owners through publicly-owned
land selling or leasing to capture the increment in land value as a result of public investment in infrastructure which
creates a sustainable financing mechanism for infrastructure provision and for urban development and expansion.
However, the usage of this financing approach in some Egyptian new cities had exposed the government to many
negative financial instability risks due to the current used policies which have caused to hinge and disturb the
national urban development strategies. On the other hand, many international cases have used this financing
approach effectively and achieved great outcomes on many levels; economic, social, sustainability, and urban
development. One of these pioneering cases and considers have the longest experience in using this mechanism is
China. The main objective of this research is to generate and deduce a management framework for this financing
approach in Egyptian new cities based on the Chinese model. Accordingly, the research methodology includes
literature review and qualitative analyses of some international pioneering cases in China in an attempt to deduce a
set of criteria that eliminates any potential risks, neutralize the occurred risks, and unlock the full potentialities of
this financing approach in Egyptian new cities. In conclusion, using land based financing effectively and with the
right and suitable policies would achieve the governmental socio-economic, urban development, and sustainability
objectives while keeps the negative impacts at their lowest levels.

© 2019 The Authors. Published by IEREK press. This is an open access article under the CC BY license
(https://creativecommons.org/licenses/by/4.0/).
Keywords
Urban Infrastructure; Land Value; Management; Urban Economics; Sustainable Financing

1. Introduction
Land based financing LBF is a method in which can be used to obtain and collect the needed capital for urban
infrastructure projects through the sale, lease, or participation of the public lands with developers of lands owners.
However, the value of public lands is being inclemently increased as a result of the governmental investment in
infrastructure. Accordingly, LBF considers an approach of land value capturing. This would provide part or even
all the needed financing for these kinds of projects without depending on the general budgets of countries or on the

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low income citizens.

However, Egypt, Alike many other countries, uses this financing approach in new cities in order to provide all the
needed utilities. Despite the tremendous success of this financing approach in many international examples, the
current Egyptian used policies to capture the increment in public lands value has caused many negative risks and
threats. The international examples include Australia, Netherlands, Sweden, Israel, Finland, Singapore, Russia,
USA, Poland, China, Turkey, India, South Africa, Philippines, and Ethiopia. Some of these international pioneering
cases have presented effective policies that have proven their ability to face unexpected negative risks. However,
not all of the international cases are similar to the Egyptian circumstances. Only the Chinese model is similar to
the Egyptian model with very few differences as will be illustrated later.
The research problem is that despite the success of this financing approach in many international examples, it has
been causes many negative risks locally in Egypt. Accordingly, exploring the feasibility of neutralizing negative
risks of this approach would help to unlock the comprehensive potentialities of it, avoid and eliminate any of the
potential threats, and neutralize the already taken-place negative impacts.
The main objective on this research is to generate, derive, and deduce a public land management framework
for this financing approach in the Egyptian new cities based on the Chinese experience which unlock the full
potentialities, eliminate risks, and neutralize the already occurred negative impacts of this financing approach.
In order to achieve the previously mentioned objective, the research methodology includes literature review and
comparative qualitative analysis of some pioneering cases in China in an attempt to deduce a set of criteria that
eliminate any potential risks and unlock the comprehensive potentialities of this financing approach. Accordingly,
the research structure will be divided into two parts; the literature review part and the Chinese model analysis. The
first part will include 1) land based financing definition, justification, and its methods, 2) revision of the failure and
success stories of this financing approach in Egypt, and 3) the land value increment determines. The second part
will include 1) the Chinese model selection criteria, 2) analysis of pioneering cases studies in China, and 3) the
management framework deduction.

2. Negative Impacts of Land Based Financing from the Literature

By reviewing literature, a number of published papers and reports introduce many negative impacts of using land
based financing in Egyptian new cities that have affected negatively on all sectors of investments and business as
well as have hinged the urban and economic growth.
In 2006, the World Bank investigated the influence of the public land management policies in Egypt and invest-
ments. The study is based on analyzing the used policies in Egypt and their impacts on investment in various
sectors including industrial manufacturing, real estate development, tourism, and agriculture. It Is has been con-
cluded that the used management policies in Egypt are causing many negative impacts on investments in all sectors.
Many factors have caused these negative impacts including the governmental and institutional laws, procedures,
restrictions, land location, building permits, and utility connections(The World Bank, 2006). In 2008, it stated
that Egyptian government does not fully benefit from the increased land value resulted from public investment in
infrastructure. The study is based on the revision and analysis of recent studies of Egypt’s urban sector. It has been
concluded that the used public land management policies must be improved to reduce land speculation and to allow
the government to capture the increment in land value instead of the private sector and landowners. Furthermore,
the government must adopt a decentralization concept allowing for local government to participate in steering the
collected revenues from the public land management (The World Bank, 2008).
Hegazy et al suggested that a total reform of the land management policies used in Egyptian new cities is needed.
The study is based on the analysis of 6th of October new city through interviewing academic staff including profes-
sional planners and university staff. The authors concluded that many factors must be taken into consideration in
new cities in order to achieve sustainable development including new cities location, public transit infrastructure,
public land sale sequence, land coding, and accessibility (Hegazy & Moustafa, 2013).

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Tadamun initiative argued that the Egyptian new cities did not succeed in realizing their target populations. In this
paper, the new cities population growth rates national wide have been analyzed and compared. It has been con-
cluded that the revenues from the public land sale are way less than the governmental spending on infrastructure.
In addition, the new cities are suffering from the lack of suitable infrastructure and services. Furthermore, the real
estate prices are higher than what average citizens can afford (TADAMUN, 2015).
In 2017, research carried by Meselhy, he argued that the Egyptian real estate market may be suffering from a
bubble that will burst soon. The study is based on comparing the real estate conditions in Egypt and in USA.
The author has concluded that the real estate bubble symptoms that had happened in USA causing the bubble to
burstare existed in the Egyptian market. The author recommended that the decision makers in Egypt must take
actions to avoid the bubble burst in Egypt (Meselhy, 2017).
The previous studies discuss and elaborate the LBF experiences locally as well as their negative impacts (see
Table 1). The usage of this mechanism locally in the Egyptian new cities has caused many negative impacts on
investments in all sectors as well as fluctuations to business and unsustainability. The reduction in investments, the
high living costs in new cities, high housing prices, low demands on public lands, real estate bubble, and the low
outcomes of public land sale are all resulted from the unsuitable policies of using publicly-owned lands as assets
for urban infrastructure financing. In addition, the papers have concluded that the public land management policies
in Egypt must be a subject of dissection, modification, and reformation since these policies are causing negative
risks on all aspects of life; social, economic, urban development, investment, and quality of life.

Table 1. Literature Review Summary of Papers Concerned with the Negative Impacts of LBF in Egypt
Year Author Publishing Country Area of Focus Objectives
2006 The World Bank USA Public land man- Examining the pub-
agement in Egypt lic land manage-
ment policies and
exploring their suit-
ability for invest-
ments
2008 The World Bank USA Infrastructure fi- Presenting a review
nancing and urban of the urban sec-
development in tor in Egypt and
Egypt the used financing
methods for infras-
tructure provision
2013 Ibrahim Hegazy, Wael Egypt Development in Investigating the
Moustafa New Cities assess- challenges of
ment sustainable devel-
(6thof October) opment in 6th of
October new city
and exploring the
potential action to
achieve sustainable
development
2015 TADAMUN Egypt New cities Evalua- Evaluating new
tion national wide cities and whether
do they have
achieved their
targets or not.
Continued on next page

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Table 1 continued
2017 Mohamed Meselhy Egypt Real Estate Bubble
Comparing be-
(New Cairo)
tween the housing
bubble in New
Cairo new city,
Egypt and USA
Source: Author, based on (The World Bank, 2006)(The World Bank, 2008)(Hegazy & Moustafa,
2013)(TADAMUN, 2015)(Meselhy, 2017)

3. Land Based Financing as One of the LVC Approaches

Using public lands as assets can provide the required revenues in short time with simple administrative procedures
when being compared with the other two LVC approaches. However, the other two LVC approaches are being
characterized by:

– As for the taxation based approach, it needs a long period to achieve the needed revenues as well as huge
number and high densities of citizens and suffers of political rejection in many cases.

– As for the development based approach, it suffers from its need for a soohisticated administrative and mar-
keting skills and has narrow base of contributors.

On the other hand, LBF has a wide base of contributors which enable it to collect revenues in short period through
the direct public land sale or lease. In addition, LBF needs vacant publicly-owned lands in order to work effectively.
As a result, the Egyptian new cities constitute a fertile example to use this financing approach. Furthermore,
the LBF approach is being used in many international examples effectively, accordingly, the use of its methods
themselves is acceptable, but rather their application in some local cases local new cities in Egypt is the problem.
As a result, this financing approach has very good potentialities under certain conditions which will be identified,
derived, and deduced of the qualitative analysis of the Chinese model.
There are about three main technique of the land-based financing; the sale of public lands, the lease of public lands,
and the grant or participation of public lands with developers in exchange for other benefits. These techniques are
not fixed and they can be modified based on each example circumstances and conditions (Peterson G. , 2009) (The
World Bank, 2006).

– As for the taxation based approach, it needs a long period to achieve the needed revenues as well as huge
number and high densities of citizens and suffers of political rejection in many cases.

– As for the development based approach, it suffers from its need for a soohisticated administrative and mar-
keting skills and has narrow base of contributors.

On the other hand, LBF has a wide base of contributors which enable it to collect revenues in short period through
the direct public land sale or lease. In addition, LBF needs vacant publicly-owned lands in order to work effectively.
As a result, the Egyptian new cities constitute a fertile example to use this financing approach. Furthermore,
the LBF approach is being used in many international examples effectively, accordingly, the use of its methods
themselves is acceptable, but rather their application in some local cases local new cities in Egypt is the problem.
As a result, this financing approach has very good potentialities under certain conditions which will be identified,
derived, and deduced of the qualitative analysis of the Chinese model.
There are about three main technique of the land-based financing; the sale of public lands, the lease of public lands,
and the grant or participation of public lands with developers in exchange for other benefits. These techniques are
not fixed and they can be modified based on each example circumstances and conditions (Peterson G. , 2009) (The
World Bank, 2006).

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Using public lands as assets can provide the required revenues in short time with simple administrative procedures
when being compared with the other two LVC approaches. However, the other two LVC approaches are being
characterized by:

4. Lands as Assets for Urban Infrastructure Financing

Land considers one of the four production factors. The other three factors are capital, entrepreneurship and labor. In
order to use lands as assets, its nature must be described and its value determents must be identified and illustrated.

4.1. Land Nature

The main characteristics of lands are:

– Its free gift of nature so that it cannot be produced. Accordingly, the government does not need to pay any
capital in order to get lands from anyone.

– It is fixed in supply so its amount is fixed and inelastic. Once, the available lands are sold there will be no
more lands unless it is being brought from someone.

– It is immobile so land cannot be transported from a place to another and each land has its unique physical
conditions and specific context.

– It is a primary factor for all industries whether to be located in or to get the raw material from. Accordingly,
it is very important and subject to the principle of supply and demand.

– It is a passive factor of production so it cannot produce anything by itself which means that its value is being
determined by its owner activity and the improvements that being made within it (Francis, 2010).

4.2. Land-Value Determinants

Land value is being determined mainly by the market forces of supply and demands. Whenever the demands on
lands are gotten higher, the prices would incrementally increase and vice versa. However, demands on lands are
being affected heavily by many factors. These factors are development regulation, accessibility, social, cultural, and
demographic factors, physical attributes of lands and infrastructure, and land speculation (see Figure 1) (Francis,
2010).

Figure 1. Land-Value Determinants – Source: (Francis, 2010)

4.2.1. Development Regulations

The regulation and the physical planning strategies adopted by the government can push up the value of lands.
This includes zoning laws; land uses code, building codes, rent controls, and any other regulations (Francis, 2010).
Planning strategies and quality are tended to achieve the perfect composition which in turn would achieve the

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highest land value. Accordingly, the bad planning strategies and the low planning quality would create a land
use conflict and low demands on lands and in turn would decrease the land value (Obala, 1990). For examples,
prohibiting some land uses may decrease their supply against the demands which in turn would increase their
value. Furthermore, allowing for more heights and more floor area ratio would increase the lands value and vice
versa. In addition, using single-use planning strategies would create lands less in value than mixed uses planning
strategies.(Waweru, 2014).

4.2.2. Accessibility

Accessibility is concerned with both pecuniary and time cost. Lands which are connected with the surrounded
other areas with fast roads or cheap mass transit or near to the centers of the towns are more accessible and in
turn are higher in value. On the other hand, the value of lands that are located far away will get lower (Elnagdy
& AbdelAty, 2018). Value of lands is tended to move from areas that suffered from accessibility issues like
congestion, bad roads, or no public transit to areas that are more easily to be accessed and reached (Thorncroft,
1965). Alike, lands value located in a central location and near the city center is higher than lands located in
marginal areas.

4.2.3. Social, Cultural, and Demographic Factors

These factors include population, prestige and education levels, migration, residents’ income, and all the other
social issues. Any social activity that causesto an increase in demands over a specific urban area would increase
its value and vice versa. For example, in the 1950s, United Nations Reports showed that the value of lands in
cities has been raised due to the influx of migrants from rural to cities (Francis, 2010). In addition, an increase in
resident’s income would increase their purchasing power and willingness allowing them to buy more properties.
Accordingly, the pressure on the fixed supply of lands will get higher and the value would be increased (Onyango,
1988). Furthermore, the desire of human being to be part of specific unique community increases this community
value. These unique communities may include rich communities, diplomat’s communities, or highly educated
communities. On the other hand, the increase in population may affect negatively on land value in case of over-
crowding. Alike, areas that culturally unsuitable, cause fear and sense of insecurity, or do not have an identity may
not attract local residents.

4.2.4. Physical Attributes of land and Infrastructure

The physical attributes of the lands include soil characteristics, climate, location, and topography. The physical at-
tributes of infrastructure include the availability of water, sewer, electricity, public transit, and any other traditional
network and the availability of hospitals, schools, parks, police stations, and any other services.
Different soil characteristics affect the land value according to its land use. As sand soil increase the value of
residential lands but decrease the value of agricultural lands (Syagga, 1994). Alike, different topography, climate,
and location characteristics affect the land value according to its land use. For example, lands located near to slums
have a less value than lands near a high-class residential community. As for the physical attributes of infrastructure,
Mbugua argues that the value of lands and properties that have a good access to water supply, electricity, drainage
and other services like hospital and commercial uses is tended to get higher than those with bad access or no access
(Mbugua , 2000).

4.2.5. Land Speculation

Land speculation is the purchase of land by high-income people and keeping it undeveloped for a while with the
hope that it will become more valuable in a future. This would create an artificial land scarcity and would cause

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a bubble in the lands and real estate market. Accordingly, the prices of lands are becoming unreasonably high
(Kreibich & Kombe, 2000).

4.2.6. Land Value Determination Summary

Table 3summarizes the previously mentioned land-value determinants that can limit or enhance the lands and
properties values.

Table 2. Land Value Determinants Summary

Land-Value Determinants
Development Accessibility Social, Cul- Physical Attributes Land Speculation
Regulations tural, and of Land and Infras-
Demographic tructure
Factors
Maximize Allowing more Land is acces- Moderate hu- Suitable soil, cli- The existence of
the Land heights and sible by pub- man migration mate, context, and high-income land
Value floor area ratio lic transit and to cities topography for the speculators in-
Mixed uses roads Income in- land use creases land value
High-quality Land in central crease Infrastructure and unreasonably but
planning location Unique presti- services are avail- creating bubble
Good land use gious commu- able
management nities
Communities
with identity
Minimize Limiting heights Land is far Human mi- Unsuitable soil, Non-existence of
the Land and floor area away from gration from climate, location, land speculators
Value ratio public transit cities and topography for decreases the land
Single uses and roads Overpopulation the land use value but creating
Low-quality Land does not Infrastructure and healthy market
planning have Income de- services are unavail-
Poor land use Land in remote crease able
management location Deteriorated
informal com-
munities
Communities
with no iden-
tity
Source: Author, based on (Kreibich & Kombe, 2000), (Mbugua , 2000), (Syagga, 1994), (Onyango, 1988),
(Francis, 2010), (Waweru, 2014), and (Obala, 1990).

5. International Effective Policies from China

Many countries have used public lands as an asset for urban infrastructure financing including Australia, Nether-
lands, Sweden, Israel, Finland, Singapore, Russia, USA, Poland, China, Turkey, India, South Africa, Philippines,
and Ethiopia (Nystrim, 2007)(Peterson G. , 2009). Some of these international pioneering cases have presented
effective policies that have proven their ability to face unexpected negative risks. However, Australia, Netherlands,
Sweden, Israel, Finland, Singapore, Russia, USA, and Poland are classified by having very high human develop-
ment indicators according to 2017 statistics (United Nations Developemnt Programme, 2017). These indicators

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include the Human Development Index (HDI), the Inequality-Adjusted Human Development Index (IHDI), the
Gender Development Index (GDI), the Gender Inequality Index (GII), and the Multidimensional Poverty Index
(MPI). Accordingly, it is no use of comparing such cases with the Egypt since they are a lot advanced (economi-
cally, ideologically, culturally, and socially) and in order to create a public land asset management framework that
is feasible and applicable in the Egyptian new cities, the cases that will be analyzed must be similar to the Egyp-
tian new cities circumstances. The cases that are similar or close to the Egyptian human development indicators
according to 2017 statistics are China, India, Ethiopia, South Africa, Philippines, and Turkey.
However, not all of the international cases are similar to the Egyptian circumstances. The usage of public land
in Turkey, Philippines, and South Africa is based mainly on old properties sale within the inner urban fabric of
cities’ centers and it is not used as a primary financing source (Peterson G. , 2009). In addition, the usage of public
lands in India is based on acquiring land from private individuals by law force then reuses them which resulting
many conflicts between government and landowners. In addition, this mechanism is being affected heavily by
political considerations (Raghuram & Sundaram, 2009). As for Ethiopia, all reviewed published papers within the
literature review have highlighted that its policies are in deep need for reformation (Yirga, 2014). Accordingly,
only the Chinese model is similar to the Egyptian model with very few differences since 1) they are close to each
other in the HDI, 2) the government owns the lands, and 3) they use this financing mechanism as a primary way of
financing (see Table 4).

Table 3. Countries where governments use public lands as an asset for urban infrastructure financing
Case Human Develop- Classification Rank Comments
ment Index HDI
Egypt 0.69 *** 111 —-
Australia 0.93 * 2
Netherlands 0.92 * 7
Sweden 0.91 * 14
Cases with very high human development
Israel 0.89 * 19
indicators and they are a lot advanced
Finland 0.89 * 23
(economically, ideologically, culturally, and
Singapore 0.92 * 5
socially)
Russia 0.80 * 49
USA 0.92 * 10
Poland 0.85 * 36
China 0.73 ** 90 Ideal competitive
Turkey 0.76 ** 71 Using old properties sale within the inner
South 0.66 *** 119 urban fabric of cities’ centers and it is not
Africa used as a primary financing source
Philippines 0.68 *** 116
India 0.62 *** 131 Acquiring land from private individuals by
law force then reuses them which resulting
many conflicts
Ethiopia 0.44 **** 174 The used policies are in deep need for refor-
mation

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Notes
Human Development Index HDI includes health, education, income, inequality, gender, poverty, work, em-
ployment, human security, trade, financial flows, mobility, communication, environment, sustainability, and
demography factors.
* Very High HDI ** High HDI
Above 0.8 Above 0.7
*** Moderate HDI **** Low HDI
Above 0.55 Below 0.55
Source: Author, based on data from (United Nations Developemnt Programme, 2017)

The Chinese model consists of two polar; all the Chinese cities and Honk Kong. Each of these two polar has
its unique policies. Despite Hong Kong follow China administratively, it has its own laws and policies. In facts,
Honk Kong has used public land as an asset for infrastructure financing before all China cities by about 138 years.
Accordingly, Hong Kong has a lot of experience than all the Chinese cities and considers the most successful case
worldwide in using public lands as an asset for urban infrastructure financing (Nystrim, 2007).

5.1. Hong Kong, SAR (Special Administrative Region), China

Hong Kong is Special Administrative Region that follows China and consists of three main regions; they are Hong
Kong Island, Kowloon, and New Territories. The selection criterion of this case is based on the adopted policies
by the government when demands on lands getting low and its unique urban development strategies around public
transit nodes.

5.1.1. Hong Kong Public Land Lease Mechanism during Crisis

Public lands are being lease in Hong Kong since 1841. The government owns the vacant lands in Hong Kong. It
supplies the market with the pre-announced amount of lands in targeted development locations in order to be leased
by private developers. So, it leases lands (sells the development rights only of lands) to private developers for 50,
75, and 99 years that can be renewed after re-assessment of the land rent (Government of Hong Kong, 2017).
Despite the negative impacts of the Asian financial crisis in 2001 on Hong Kong economic system and especially
on the public land lease revenues, the policy adopted by government of Hong Kong has enabled the government
from face such a crisis. This policy is called “Demand Oriented Model”.
When the Asian financial crises took place in 2001, the land leases contracts and the demands on lands and prop-
erties have declined severely and as a result, the government has suspended all land sales for commercial devel-
opment. The total revenues collected have plummeted almost to zero (Peterson, 2006). Accordingly, after 2003,
the government has changed its policy from a proactive role to a more passive one. The government has switched
from the supply-oriented model to demand-oriented model. Before the financial crisis in 2001, the government
was supplying the market with the pre-announced amount of lands in targeted development locations. After 2003,
the lands and their infrastructure are being provided by the government only in response to the private developer’s
requests and for the prices suitable and acceptable for the government. This would prevent the government from
providing infrastructure for lands that will not be sold.
Between 2004 and 2010, the land sale revenues started to increase very slowly. Staring from 2010, the revenues
started to increase as in 2012 only the total number of sold lands was equal the total number of sold lands between
2004 and 2010. Accordingly, the government in 2013 has made a decision to switch back to supply-oriented model
(Li, Wong & Cheung, 2015).
In addition, the notion of land lease is ensuring the sustainability of financing since lands are going back to the
government in the end of the lease time in order to be re-leased again. Furthermore, this would ensure that at all
times the government will be the only owner of all lands.

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5.1.2. Public Land Management around Public Transit Stations

Hong Kong has a very unique management framework for public lands around public transit stations. It is called
Rail plus Property (R+P).
As Figure 2 showed, the government sells the development rights of lands around the public transit paths and nodes
to public transit operator for 50 to 70 years. The operation company is owned by the government. This sale is being
performed before the construction of the public transit project. The operator pays the land premium for these rights.
However, the operator buys the development rights of lands before its value is getting higher. Then, he starts to
divide these lands into small parcels to sell their development rights to private developers. Those developers pay
the costs of the land premium to him and bear the construction costs of the development. So, he does not bear
any financial risks. However, the public transit operator generates revenues through receiving a portion of the
private developer’s profits according to the agreement or in some cases; he may have the ownership of some of
the commercial and office spaces to lease them. Furthermore, R+P program does not only achieve huge revenues,
but it can be used to face the huge increase in residential and commercial spaces demand and to encourage urban
development. As since 1995 to 2010, R+P program was responsible for an increase in the residential units by
approximately 100.000 units through its encouraging attribute of the urban development (Verougstraete, 2014).

Figure 2. Hong Kong Public Land Management Model around Public TransitStations – Source: (Elnagdy & AbdelAty, 2018)

This model would allow governments to achieve the maximum revenues from pubic land management around
important surface infrastructure nodes and paths without bearing financial risks. This includes the public transit
routes and stations, roads, and other services (hospitals, education facilities public spaces, universities, etc.). In
addition, this model would encourage and steer urban development and urban expansion.

5.2. The Chinese Cities

As mentioned early, the Chinese cities have learned a lot from Hong Kong experience in public land management.
Accordingly, Chinese cities have experienced an extraordinary economic growth and urban growth. However, the
Chinese financing mechanism has a lot of effective policies and practices that enabled the government to support
the economic and urban growth challenges.

5.2.1. Public Land Leasing Methods (Listing and Tender Auction)

Public land lease is being used in China since the economic reforms in 1979. However, before 2004, 98.6%
of lands were leased through negotiation. After 2004, a notice was issued obligating the government to lease

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lands through tender auction or listing auction (Yang, Ren, Liu, & Zhang, 2014). In listing auction, the land is
being sold to the bidder offering the highest price. In tender auction, all bedding are being evaluated according
specific criteria like bedding price, corporation reputation and performance, the proposed development plan, and
the payment conditions. The land is being sold to the bidder with the highest evaluation score.
Despite that public land lease can achieve huge economic benefits to governments; this mechanism may cause
many social undesirable consequences. The government should intervene in order to keep the balance between the
economic benefits and the social objectives. If the government left the land allocation to the commercial forces
then the result would be a net loss to the entire society (Brueckner, 2007)(Deng, 2003).
However, the usage of the previously two auction types has helped the Chinese government to promote urban
development, stabilize the housing prices, encourage low housing, and keep the balance be the entire Chinese
economic system. In listing auctions, the government achieves the highest potential revenues since the highest
bidding will get the land according to the free market power. On the other hand, in tender auction, the government
achieves its macroeconomic and social objective since bidding with the highest score according to the government
objective will get the lands.
The tender auction can be classified as the evolutionary model of leasing land through negotiation. The tender
auction allows governments to achieve their economic objectives with the highest benefits for the society and with
the least corruption probability.
Furthermore, alike all Chinese cities, the government does not lease land to individuals. The government only
leases land to private developers. This would reduce the construction period, increase the urban development
process, reduce buildings permits needed as well as building violation, and reduce the pressure on the government
facilities.

5.2.2. Integration between Public Land Lease and other Financing Sources

The integration between public land lease and other financing sources is one of the most innovative policies adopted
by the Chinese government. The traditional public land lease method requires the existence of public fund to
construct urban infrastructure which in turn would increase the value of lands around this infrastructure. After
that, the government starts to lease lands with the after-development value.
The integration between public land lease and other financing sources policy is based on that the government
borrows money from local and international banks against the future anticipated value of the improved lands. This
money would use to finance the infrastructure construction and in turn the government lease public land with the
after-development value. The revenues are being used to repay the banks loans (Peterson G. , 2006).
This policy would enable governments from creating urban expansions and constructing infrastructure even without
the existence of public fund ate the start point of projects. Accordingly, the integration between public land lease
and debts has created a loop of sustainable financing that require a zero capital in its start point.

5.2.3. Redevelopment of Public Lands

Redevelopment of public lands policy adopted by the Chinese government has proven its ability to raise huge
revenues as well as encourage urban development. The redevelopment of public lands policy is based on moving
State Owned Enterprises (SOE) and Municipality’s administrative buildings from the central location in the city
centers to new locations where lands are cheaper. However, this process is being managed by a central authority as
in first years of this policy implementation, many SOEs has tried to capture the land lease revenues for themselves.
The existence if this central authority would guarantee the fair and right distribution of these revenues for the most
suitable projects instead of being a privilege for a particular sector or individuals (Chreod, Ltd., 2005).
This policy has two-faced importance. First, the government leases the vacant lands through auction for develop-
ers to construct housing, small-scale business, and commercial activities. These vacant lands are characterized by

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being in central locations and have the highest land value. Second, the new locations where the SOEs and Munic-
ipality’s administrative buildings will be constructed on would act as new urban centers for new urban expansion
which encouraging urban development. In addition, this would immediately increase the lands value around these
new locations allowing the government to lease the surrounded lands.

5.3. Effective Policies Summary

Each of the previously mentioned local and international cases has introduced a set of effective policies. Table 5
summaries these effective policies and elaborate their positive impacts.

Table 4. Countries where governments use public lands as an asset for urban infrastructure financing
Used policies Positive impacts Case
Land leasing The sustainability of financing since lands
Hong Kong, Special Administrative
are going back to the government after the
Region, China
lease period
Demand-oriented model Optimizing the governmental spending’s
(providing public lands
only based on the private
sector requests)
The development poli- Encouraging urban development
cies of public lands Maximizing revenues
around surface important Reducing financial risks
infrastructure paths and Ensuring the continuity of the revenues
nodes stream
Integration between list- Archiving the maximum socio-economic
ing auction and tendering objectives
auction The Chinese cities
Leasing lands to private Reducing the construction period
developers only (the gov- Increasing the urban development process
ernment does not lease
lands to individuals) Reducing buildings permits needed as
well as building violation
Integration between land Creating a loop of sustainable financing
lease and loans that require a zero capital in its start point.
Single central authority Preventing conflicts due to governmental
that manage public lands institutions fragmentation
Moving state owned Leasing the vacant lands through auction
enterprises (SOE) and for developers. These vacant lands are
municipality’s admin- characterized by being in central loca-
istrative buildings from tions and have the highest land value.
the central location in Creating new urban centers for new urban
the city centers to new expansion which encouraging urban de-
locations velopment. This would immediately in-
crease the lands value around these new
locations
Source: Author, based on (Peterson G. , 2006)(Li, Wong, & Cheung, 2015)(Brueckner, 2007)(Deng,
2003)(Chreod, Ltd., 2005)

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6. The Preliminary Public Land Asset Management Framework

The Public land asset management framework consists of three main parts; the threats analysis, the public land
management criteria, and the management program application feasibility (see Figure 3).

Figure 3. Public Land Asset Management Framework Parts -Source: Author

6.1. Part One: Threats Analysis

The main objective of this stage is to analyze the current situation. This analysis includes three stages:

– Firstly, the identification of the threats including all the occurred threats and all the predicted ones

– Secondly, the assessment and evaluation of these threats to create a full picture of their results as well as to
identify their severity. In this stage, the threats with low negative impacts will be neglected and excluded

– Thirdly, the detailed analysis of each of the major threats to identify and explore their root causes

6.2. Part Two: Public Land Asset Management Criteria

The public land management criteria consist of three main parts; public land management, financing process
management, and stakeholder management.
Each of these parts includes a set of practices and criteria that, if used, would eliminate any potential negative im-
pacts and unlock the comprehensive potentialities of this financing approach. These potentialities include achieving
the maximum socio-economic, urban development, and sustainability objectives. The economic objective includes
obtaining the needed revenues for infrastructure financing. The social objective includes making the real estate
market affordable for all residents. The urban development objective includes encouraging urban development and
expansion strategies. The sustainability objective includes ensuring the continuity of financing and the right of
future generations.

6.2.1. Land Management

Public land management concerns mainly with increasing the value of lands and insuring the existence of demands
on lands. However, In order to increase the lands value, many criteria must be taken into considerations:

– The existence of effective and flexible development regulation including suitable land coding, urban planning
and development strategies, and land uses management.

– Lands are in a central location near important facilities and are accessible by public transit and roads.

– The suitability of lands’ physical attributes with their land uses within the development strategies including
soil, climate, location, and topography.

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– The suitability of infrastructure’s physical attributes including the existence of the needed modern infras-
tructure and services as well as all the traditional ones.

Furthermore, the existence of demands on public lands is an essential matter for this financing approach. The
demands on lands are affected heavily with the targeted resident’s social, cultural, and demographic factors. The
government can follow two policies; the supply-oriented model or the demand-oriented model.

– When demands on lands are exceeding the land supply, the government may follow the supply-oriented
model. This model allows the government to provide infrastructure to a pre-announced amount of lands.

– On the other hand, when supply of lands is exceeding the demands on lands, the government may follow the
demand-oriented model. This model allows the government to provide infrastructure to lands only on the
request of developers.

Redevelopment of public land considers an effective way to provide public land supply. This would not only pro-
vide public lands for sale, but will also create a new urban center to encourage urban development through moving
the governmental building to a new location. In addition, this would increase the value of lands around the new
location and would give a clear signs and incentives to developers to invest in these new locations. This policy can
be applied within new cities or within old cities. In case of old cities, this would regenerate the urban fabric within
the old city centers.
Public lands around distinctive surface infrastructure nodes and paths should have different management poli-
cies. These lands include lands around public transit stations, main commercial roads, and services (hospital,
universities, schools, commercial malls, etc.). These lands have a higher value than their instances due to their
high accessibility feature to public transit, roads, and services. In addition, these lands can act as focal points to
encourage urban development.

6.2.2. Financing Process Management

Financing process management concerns with 1) the sustainability of financing, 2) the infrastructure provision, 3)
the used policies and applicant’s eligibility, and 4) the integration between more than one finance methods.
However, the infrastructure provision is divided into two main sectors:
First, the government provides urban infrastructure on its own expense
In this case and in order to ensure the infinite existence of lands and the sustainability of financing, the government
can:

– Using public land lease instead of public lands sale so lands would be leased over and over and the ownership
of lands would remain with the government.

– Using profit sharing with the private developers would ensure the existence of ongoing stream of revenues
but would need governmental supervisory authorities.

– Using “in-kind contribution’ would provide the government with properties that can be leased or sold. In-
kind contribution means that a share of the built property by the private developer would be owned by the
public sector.

Second, the private sector provides urban infrastructure on its own expense
In this case, the private sector would be responsible for the infrastructure provision. The government can:

– Using land participation method through allowing the private developers to provide and construct infrastruc-
ture on its own expense in exchange for lands which would protect the government from any kind of risks.
In addition, this would decrease the economic burdens on the government responsibilities.

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As for the used policies and applicant’s eligibility, suitable and effective payment policies must be adopted which
ensuring that land buyers have the affordability to pay the land and construction costs in an attempt to reduce the
number of speculators, to create healthy real estate market, and to encourage urban development.
Furthermore, the integration between Land Based Financing and other traditional financing methods like loans
would produce infinitive possibilities of new sustainable innovative financing mechanisms. Accordingly, the gov-
ernment may not be forced to provide an up-front capital for the infrastructure construction.

6.2.3. Stakeholder Management

Stakeholder management concerns with all the participated parties of this financing approach. However, three main
stakeholders are existing; the government, the land buyer (developers), and the end user.
Land buyers can be selected through four main methods; lottery, public auction, listing auction, and negotiation.

– Lottery is not a recommended method since it is offered to public. Most applicants do not have the afford-
ability to pay the land and construction costs. They buy land to sell not buy to hold.

– Negotiation may lack of transparency and may encourage corruption. However, this method can be replaced
by listing auction since the later can achieve the optimum social and economic objectives.

– Public auction is the most suitable way to achieve the highest economic benefits to governments but may
lead to threats to real estate market and to increase the properties prices. However, this method would ensure
that the land price is similar or higher than its real market price.

– Tender auction is suitable for achieving the society objectives while achieving the optimum economic ben-
efits to government. In addition, this method would encourage urban development and affordable housing.
However, this method would ensure that the land price is similar to its real market price.

Figure 4. Public Land Management Criteria Summary – Source: Author

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The government must deal with developers instead of individuals. This would reduce the construction period,
increase the urban development process, and reduce buildings permits needed as well as building violation. How-
ever, in case of the willingness of government to provide an affordable housing (e.g. social housing for low-income
groups) or provide any subside properties (e.g. small retails or industrial workshops); the government can achieve
that through the tendering auction method or through demand-oriented model. This would 1) ensure not to spend
capital on properties that will not be sold which constituting disabled resources and 2) decrease the economic
burdens on governments as well as mitigate potential risks.
The existence of a single central authority that manages and makes decision on public land reduces conflicts
between the different governmental institutions resulted from the governmental institutional fragmentation. In
addition, this would direct and steer the revenues toward the most suitable place and would maximize the efficiency
of such a financing approach.

6.3. Part Three: Management Program Application Feasibility

The main objective of this stage is to explore the application feasibility of the management program of the public
lands. In this part, the current local regulations and laws are being analyzed and a development proposal of these
regulations is being presented to the decision makers to apply the public land management program. However,
under certain circumstances, some laws cannot be changed due to some political and ideological considerations.
Accordingly, this would call for a redevelopment and resubmission of the public land management program in an
attempt to achieve the suitability and appropriateness of this management program with the local regulations and
laws and with the political and ideological considerations.

6.4. The Public Land Asset Management Framework Flow Chart

The implementation process and the execution stages of the three parts of the public land asset management frame-
work are being illustrated and elaborated in Figure 5, (found after the conclusion). These parts, as mentioned early,
are the threats analysis, the public land management criteria, and the management program application feasibility.

7. Conclusions
The research problem is that despite the success of land based financing in some Egyptian cases, it has been
monitored that many other cases have been exposed to set of financial instability risks. Accordingly, studying the
feasibility of eliminating these risks of the land-based financing would help in unlocking the full potentialities of
using the land-based financing, avoidance and\or elimination of any potential risks in the future, and neutralize the
already occurred negative impacts of this financing approach. The main objective on this research is to generate,
derive, and deduce a public land management framework for this financing approach in the Egyptian new cities
based on the Chinese experience which would unlock the full potentialities, eliminate risks, and neutralize the
already occurred negative impacts of this financing approach.
Many issues have been resulted from the land-based financing unsuitable policies adopted by the Egyptian gov-
ernment in many cases. The reduction in investments, the high living costs in new cities, high housing prices,
low demands on public lands, real estate bubble, and the low outcomes of public land sale are all resulted from
the unsuitable policies of using publicly-owned lands as assets for urban infrastructure financing. The public land
management policies in Egypt must be a subject of dissection, modification, and reformation since these policies
are causing negative risks on all aspects of life; social, economic, urban development, investment, and quality of
life.
However, Lands are one of the four production elements. Its value is being determined mainly by the market
forces of supply and demands. Whenever the demands on lands are gotten higher, the prices would incrementally

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increase and vice versa. However, demands on lands are being affected heavily by many factors. These factors are
development regulation, accessibility, social, cultural, and demographic factors, physical attributes of lands and
infrastructure, and land speculation.
Many countries use public lands as assets for urban infrastructure financing including Egypt, Australia, Nether-
lands, Sweden, Israel, Finland, Singapore, Russia, USA, Poland, China, Turkey, India, South Africa, Philippines,
and Ethiopia. However, it has been found that the Chinese model is the ideal comparative to the Egyptian model
since it is the closest to the Egyptian development index, it has similar circumstances, and it has been the subject
of many published researches according to the literature review.
By analyzing many Chinese cases, a set of effective policies have been deduced. The policies include 1) creating
mixed-uses high-density compact residential neighborhoods that encourage walkability and cycling, 2) creating
cities in central locations, accessible by public transit, and based on multi-economic base, 3) integration between
land value capturing and public private partnership as well as banks, 4) land leasing to developers only instead
of land sale for individuals, 5) intensive development of lands around surface important infrastructure paths and
nodes, 6) integration between listing auction and tender auction, 7) the existence of a single central authority that
manage public lands, 8) moving state owned enterprises (SOE) and municipality’s administrative buildings from
the central location in the city centers to new locations, and 9) adopting demand-oriented model during crisis.
As a result, a public land asset management framework has been deduced. It is divided into three main stages; 1)
the threats analysis stage that concerns with threats identification and assessment in order to identify their severity
and then the root causes deduction, 2) the public land management criteria stage that concerns with the mitigation
strategies generation based on the land, financing process, and stakeholder management criteria derived from the
cases effective policies, and 3) management program application feasibility stage that concerns with the local
regulations and laws analysis in comparison with the mitigation strategies.
In conclusion, using land-based financing effectively for urban infrastructure financing and with the right and suit-
able policies and procedures would achieve the governmental economic, social, urban development, and sustain-
ability objectives while keeps the potential financial risks at their lowest levels. This would allow the government
to provide the all the needed infrastructure and to create and construct new communities without bearing any
economic burdens and without depending on low-income groups to finance the national urban development and
expansions strategies.

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Figure 5. Public Land Asset Management Framework Flow Chart – Source: Author

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