The Egyptian Association of Tax Experts has emphasized that the industrial land lease system with an option to purchase, launched by the Ministry of Industry, has the potential to stimulate national industry and increase competitiveness. However, the association's founder, Ashraf Abdel Ghani, notes that seven key mechanisms must be finalized to guarantee the system's success and continued appeal to investors.
Abdel Ghani, also the secretary-general of the Senate's Economic Committee, described the lease system as an innovative solution aimed at boosting the private industrial sector and alleviating initial financial burdens on investors. The system involves leasing industrial land for an annual rent of 5% of the land's square meter price, with lease periods ranging from 7 to 21 years.
The state, represented by the Industrial Development Authority, has been expanding its offerings of industrial land to investors and businessmen through the lease system. Recent allocations include 300,000 square meters in various cities, including Borg El Arab, El Tenth of Ramadan, and New Cairo. Abdel Ghani praised this move while stressing the need for clear mechanisms to sustain the system's impact on industrial growth.
To make the lease system attractive to investors, Abdel Ghani emphasized the importance of clearly defining several key points in the lease contract. These include the total value of the industrial land, the mechanism for calculating the purchase price, conditions for transferring ownership, rights to mortgage and finance, and procedures for contract termination.
Abdel Ghani cautioned that some financing entities might exercise caution when financing projects on land whose ownership has not yet been fully transferred to the investor. This is particularly relevant if rights to mortgage or guarantees are unclear, highlighting the need for transparent contract terms from the Industrial Development Authority.
The association also recommended including these projects within the tax incentives system, considering them small enterprises deserving of support. Additionally, it suggested exempting the buildings of these factories from property tax and registration fees to encourage growth and provide liquidity for increasing production and expansion.
One of the primary advantages of the lease system, according to Abdel Ghani, is that it allows investors to direct their financial resources toward establishing factories, purchasing equipment, and production lines, rather than investing heavily in land acquisition. However, the cumulative lease cost over the contract term might exceed the direct purchase price, depending on the terms of ownership and rental value specified.
Key points
- The Egyptian Association of Tax Experts outlines 7 mechanisms to ensure the success of the industrial land lease system.
- The system aims to stimulate national industry and increase competitiveness by providing an alternative to direct land purchase.
- Clear contract terms and tax incentives are crucial for the system's success and appeal to investors.
