UPDATE 2-Egypt court scraps land sale to Palm Hills

Tue Apr 26, 2011 3:27pm GMT

* Egyptian property firms reeling from legal challenges

* Seen weighing on firm's cash flows, cancellations

(Adds analyst comments on wider impact, background)

By Sherine El Madany

CAIRO, April 26 (Reuters) - An Egyptian court ruled on Tuesday that a state land sale to Palm Hills Development (PHDC.CA: Quote) was illegal and scrapped the contract, sending more alarm through Egypt's battered property sector.

Property firms in Egypt are reeling under a string of legal challenges to their land holdings since a court ruled last year that a state deal with Talaat Moustafa Group (TMG) (TMGH.CA: Quote), the country's biggest developer, was illegal. [ID:nLDE6AL0W2]

Analysts said the court verdict on Tuesday will weigh on Palm Hills' cash flow in 2011, as the firm struggles with mounting debt and liabilities, as well as rattle Egypt's property market because of fear of contagion to other cases.

A judicial panel is expected to submit this week reports on whether a government contract with TMG should be scrapped and if a state land sale to Egyptian Resorts' (EGTS.CA: Quote) Sahl Hasheesh Red Sea resort is illegal. The judicial body's decisions have in the past influenced court verdicts.

Hisham Halaldeen, an analyst at Naeem Holding, said Palm Hills had originally bought the land for around 300 pounds per square metre, whereas other land auctions in the same area of Katameya on Cairo's outskirts had fetched 750 pounds per square metre.   Continued...

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