Middle East & North Africa

MIDDLE EAST & NORTH AFRICA ENHANCING SOCIAL HOUSING GOVERNANCE

DETAILED PROJECT DESCRIPTION - APRIL, 2016 –

THE WORLD BANK FINANCE AND MARKETS GLOBAL PRACTICE MIDDLE EAST AND NORTH AFRICA REGION ABBREVIATIONS AND ACRONYMS

AMP Affordable Mortgage Program CPF Country Partnership Framework FY Fiscal Year GDP Gross Domestic Product GoE Government of Egypt GSF Guarantee and Subsidy Fund IT Information Technology LE Egyptian Pound MNA Middle East and North Africa M&E Monitoring and Evaluation PDO Program Development Objective PforR Program-for-Results Financing PPP Public Private Partnership SCD Systematic Country Diagnostic SHF Social Housing Fund US$ United States Dollars WBG World Bank Group TABLE OF CONTENTS 4

Enhancing Social Housing Governance

Proposal Outline The project aims at strengthening the policy tools of the Social Housing Fund (SHF), and building its institutional capacity in addition to promoting private sector engagement in social housing. Implementation The Project will be run as a World Bank Executed Project. The implementation Arrangements arrangements include the involvement of SHF, private stakeholders and Central Bank of Egypt. Project Objective The objectives of the project are to (i) strengthen SHF policy tools; (ii) enhance the governance and the institutional capacity of the SHF; and (iii) promote private sector engagement in social housing. SHF is a newly established entity which is mandated by the GoE to i) propose, plan and release and supervise the implementation of social housing projects, and ii) to secure suitable residences for low-income citizens, and land management for low and middle-income citizens. The Fund is the implementing entity of the Social Housing Program within the Ministry of Housing which is charged with designing housing laws and regulations and social housing programs, as well as providing oversight for their implementation in consultation with relevant housing entities, and managing financial resources for social housing. It is a legal entity whose Executive Director is nominated by the Minister, and appointed by the Prime Minister. Fit with transition The proposed activity is closely linked to three of the main pillars Fund Pillars of the Trust Fund; namely i) enhancing economic governance, ii) inclusive development and job creation, and iii) investing in sustainable growth Implementation The project will be implemented over a period of 3 years (July Period 2016 – June 2019). Financing The approved amount is US$2.78 million. This will be split across the 2 program components.

Summary The project will have two distinct components: Program Components Component 1: Under this component, the grant will be utilized to strengthen the SHF capacity to update the existing housing strategy to reflect the latest market developments and change in priorities. The activity will also support the GoE in developing a cohesive PPP arrangement to engage the private sector in affordable housing and developing public rent model. Furthermore, the project will develop a Housing price index which is critical for social housing policies. 5

Component 2: The grant will be utilized to provide technical assistance to GoE in establishing the governance structure and institutional settings of the SHF.

Executive Summary

The accumulation of decent housing matters both because of the difference it makes to living standards and because of its centrality to economic development (shared prosperity). In addition to directly providing shelter, decent housing improves health and facilitates educational achievement. A home and its environs affect identity and self-respect. Egypt has made strides in improving access to basic services, one of the most important components of living standards related to housing

The World Bank has approved the “Inclusive Housing Finance Program” on May 5, 2015, which is US$ 500 million Program-for-Results loan to the GoE. The Program aims at improving the affordability of formal housing for low-income households in Egypt and to strengthen the Social Housing Fund's capacity to design policies and coordinate programs in the social housing sector. The program will provide demand side subsidy for end beneficiaries for both home ownership and rent.

The proposed activity will complement this Program through providing technical assistance to SHF and other relevant entities within the GoE to build the institutional capacity of the SHF and strengthen its ability of the SHF to define sound policies. This activity will also promote private sector engagement in social housing. I. INTRODUCTION AND CONTEXT

II. REGIONAL CONTEXT 1. The election of the House of Representatives in December 2015 marked the end of the political transition process. This should help to gradually restore political stability and extend the economic recovery started in FY15. However, security conditions have been undermined by a number of terrorist attacks on tourists, including the Russian airplane crash over Sinai in October 2015, followed by another attack in the Red Sea city of Hurghada in January 2016. 2. Economic activity picked up in FY15 after four years of slow growth, yet challenges remain and are aggravated by the recent foreign exchange crunch. Growth reached 4.2% in FY15, double the growth recorded during FY11-FY14, boosted by improved confidence, resilient private consumption, and sizeable public investments that started to crowd-in private investments. However, key sectors (such as tourism and manufacturing) have been underperforming. The oil and extractives sector also continued to be strained by the arrears to foreign oil companies (US$3 billion by end-2015). More generally, the scarcity of hard currency and appreciation of the exchange rate in early-FY16 have undermined Egypt’s competitiveness. Thus, preliminary figures for the first half of FY16 point to subdued growth of just below 3% (from 4.8% last year), mainly due to the acute shortages in foreign exchange supplies that are stifling domestic production and affecting the overall investment sentiment. 3. Therefore, the Central Bank of Egypt (CBE) allowed the official exchange rate to weaken by 14.3% in mid-March 2016 as pressures on external accounts intensified. Net international Reserves (NIR) started to drop in early-FY16, due to large debt repayments, the unfavorable external environment, terrorist acts, as well as the CBE’s ongoing injection of foreign exchange to meet import needs and to clear foreign currency backlogs. As a result, NIR declined to just below US$16.5 billion by end-October 2015, and has stabilized at around this level through end-March 2016; barely covering 3 months of merchandise imports. However, as hard currency shortages have not been resolved, the parallel market premium has reportedly spiked once again to 13% above the recently devalued official rate, as of early-April 2016. 4. Social conditions continue to be a concern, especially in the light of the high food inflation and unemployment rates. Headline inflation started to ease slowly, albeit still high at 9% in February 2016, from an average of 11% in the previous three months. The elevated inflation was mainly driven by strong growth in domestic food prices (14% over the past four months), higher electricity and utility prices, and the effect of the depreciated parallel exchange rate which was sometimes used to clear black-logged imports held in ports. In response, the CBE has recently started tightening monetary policy, with key policy rates hiked by 150 basis points following the mid-March exchange rate devaluation. The poverty rate in Egypt was last recorded at 26% in FY13, and may be increasing further given the food price inflation. Meanwhile, unemployment is starting to slowly inch downwards (reaching 12.8% in the first half of FY15 versus 13.3% a year earlier), albeit partially reflecting dropouts from the labor force with labor force participation rates - which recorded a low of 46% of the adult population (those above 15 years old) versus 50% at end-2010. 5. The pace of fiscal reforms has slowed down since the beginning of FY16, with key measures (such as the VAT) continuing to be on hold. Following the consolidation efforts that brought down the high structural deficit by 4% of GDP in FY15, the momentum of reform faded in FY16, with efforts mainly focused on containing the bloated public expenditures, through stemming the growth of civil servants’ wages. But the timely follow-through with the wider fiscal reform agenda is crucial, as the government is set to increase expenditures on health and education to comply with the constitution mandate, and to step up capital spending to address infrastructure gaps. The draft budget for FY17 has been submitted to the parliament for approval, with a target deficit of 9.9% of GDP, compared to an expected 11.5% of GDP in FY16.

III. SECTORAL AND INSTITUTIONAL CONTEXT 6. The housing sector in Egypt is facing numerous challenges. Egypt has never had a coherent housing policy, which prevented the Government from addressing the pressure on the housing sector caused by high population growth and urbanization. Government programs and policies for underserved population groups have been implemented by multiple uncoordinated units within the Ministry of Housing, Utilities and Urban Development and other public authorities, resulting in major gaps in available housing programs for underserved groups. Past subsidy programs, that focused on the supply of Government built houses for ownership, were extremely costly (amounting to LE 1.5 billion in 2012, around US$ 230 million) and did not reach the required scale to really affect the supply of formal housing options for the poor. The private sector played only a negligible role in the provision of middle and low-income housing. Land policies have been inefficient, and rental market regulations hindered the development of the rental housing market. To tackle those issues, the Government of Egypt (GoE) has designed an Inclusive Housing Finance program that aims at improving the affordability of formal housing for low-income households and to strengthen the Social Housing Fund's capacity to design policies and coordinate programs in the social housing sector. 7. Poor policies and low-income and finance affordability resulted in chronic housing shortages and growth of informal housing. The housing backlog is up to three million units. Egypt requires approximately 300,000 new housing units per year to house newly formed households, plus an additional 254,000 units to gradually deal with the backlog of housing over the past five years.1 However, total formal housing production in the country has not exceeded 200,000 units per year.2 At the same time, a large proportion of existing houses is not available because they are left vacant or unfinished by the owners (an estimated three million units in urban areas alone). The relatively low housing production levels, high vacancies, and low incomes relative to housing costs have resulted in a rapid growth in informal housing production which is estimated at half of total housing production, and sometimes more. It is estimated that 12 to 20 million people live in informal housing areas, with inadequate services and infrastructure 8. An overview of current options in Egypt’s urban housing market reveals a major gap in formal ones for the lower-income segments of society, as shown in Table 1:

1 Ministry of Housing, Utilities, and Urban Development (2014).

2 National accounts show that the Egyptian economy has been investing on average 1.8 percent of GDP in housing over the past two decades. These levels of investment are low compared to the housing needs of the country and its urbanization rate, but these figures exclude informal housing production. Comparable lower middle-income countries invest on average six percent of GDP in housing. Average investments for MNA region are estimated at around 4.5 percent of GDP.  Formal home-ownership without subsidy is accessible for households with incomes in the top 30 to 40 percent of the household income distribution.  Subsidized new formal ownership housing has been the dominant type of Government housing program during the past few decades. Previous programs had unsustainably high subsidies. Furthermore, subsides were provided to the developers (supply side), which suffered from difficulties to verify beneficiary incomes and eligibility. A new, more efficient subsidy program linked to mortgage was launched in 2010, which serves households with income as low as LE 1,000 (below the 2nd decile of the income distribution).  Subsidized self-construction options existed in the past, but were poorly managed and have been discontinued.  New formal rental market serves mainly middle and higher income households. No new formal private rental housing is constructed for low-income households. Public rental programs delivered only a small number of units. Rental units under old rent control contracts serve middle and higher income households disproportionally.  Informal rental and ownership housing provide the most important housing options (estimated at 50 percent of urban units) and are utilized by very low to middle-income households. Table 1: Product Gaps in the Egyptian Housing Market

Income Groups3 1 2 3 4 5 Income Bracket (LE per month) <1,450 1,450–1,900 1,900–2,400 2,400–3,200 >3,200 Median Household Income* 1,100 1,700 2,100 2,700 4,100 Income Category Very Low Low Middle Upper Middle Upper Market Ownership Subsidized Ownership (demand-side) Rental Market (new rental law) Rent Control (decreasing) Informal (rental and ownership)

Authorities’ responses to these issues

9. In response to these challenges, the current Government and the Ministry of Housing have recently undertaken substantial transformational policy reforms. These reforms have strengthened the legal, regulatory and institutional framework in the housing sector, in an attempt to remedy and tackle crippling structural issues that have been the root causes that hinder the development of the housing sector in Egypt for decades. The Government’s commitment to improve accessibility and affordability for low- and middle- income households was evident in the undertaking of long-awaited key legal and regulatory reforms These included: improving building codes; introducing regularization of informal

3 * Median monthly income by quintile based on CAPMAS Income and Expenditure and Consumption Survey (2012/2013). Source: CAPMAS, Income and Expenditure and Consumption Survey (2012/2013). areas; initiating reform of subsidies; improving real estate transaction and property registration systems; promoting private sector participation; enhancing inclusion and facilitating access to mortgage loans; and streamlining foreclosure procedures. These reforms were complemented by the strengthening of the institutional framework for social housing through the adoption of the law establishing the Social Housing Fund (SHF), expanding housing options for the lowest income groups, as well as improving their access to services and employment. Consequently, a concerted effort is now critical to improve the governance of the social housing sector, design and implement more efficient and equitable subsidy programs for the underserved, and integrate market solutions and funding—addressing the Egyptian people’s needs. 10. Furthermore, the Government intends to increase the role of the private sector in both the development of social housing and the financing of units. The Ministry is currently contemplating public-private partnership (PPP) agreements with private companies to develop mixed-income housing developments that would include a specified percentage of housing units affordable to the target beneficiaries of the SHF 11. However, the GoE still needs to strengthen its policy tools in order to improve the efficiency of the housing system in Egypt and as a new institution, the SHF in charge of the GoE Housing Program still lacks institutional capacity.

IV. ALIGNMENT WITH COUNTRIES NATIONAL STRATEGY 12. The proposed activity is closely linked to the World Bank Group (WBG) strategic goals, and the 2015 MNA Regional Strategy, as well as the Systematic Country Diagnostic (SCD), and the Country Partnership Framework (CPF):  The activity is aligned with the MNA Regional Strategy, which emphasizes governance, job creation, inclusion and sustainable growth as key pillars. The project fosters governance as it will assist the Ministry and the SHF in setting policies for the housing sector that will enhance transparency and accountability, notably through the establishment of monitoring and evaluation (M&E) systems, internal audit, and a grievance redress mechanism. Overall, the project will ensure that any existing or future inclusive housing policies are “pro-social” and will not be reversed, weakened or diluted.  Furthermore, the SCD indicates that reforming the housing sector, improving its governance structure, and increasing the supply of affordable, well-located and quality housing is essential for achieving the strategic goals of ending extreme poverty and boosting shared prosperity in a sustainable manner. The project specifically addresses one of the three highest priorities identified in the SCD, specifically in "improvement in public governance”. It supports and backs the Government’s attempt to fundamentally improve the governance of the social housing sector, a large economic sector, through the efficient institutionalization and operationalization of the SHF, strong legal and regulatory reforms, and effective policy enforcement. The proposed activity is linked to the CPF as one of the latter’s objectives is to improve access to affordable housing.

V. ALIGNMENT WITH THE TRANSITION FUND OBJECTIVES 13. The objective of the proposed activity is to support the implementation of the World Bank Inclusive Housing Finance Program-for-Results operation. The Program aims at i) strengthening the Social Housing Fund's capacity to design policies and coordinate programs in the social housing sector and ii) improving the affordability of formal housing for low-income households in the Arab Republic of Egypt. The proposed activity will also provide support in establishing the institutional settings of the SHF with a proper governance structure that is according to international best practices. This technical assistance will enable SHF, as a public institution, to design and implement social housing policies that will reflect positively on the lives of the end beneficiaries who deserve access to proper social housing. 14. The proposed activity is closely linked to three of the main pillars the Trust Fund, namely i) enhancing economic governance, ii) inclusive development and job creation, and iii) investing in sustainable growth. This project is also closely linked to the ongoing regional affordable housing transition fund, which is being implemented in Tunisia and Morocco. The proposed project complements, and builds on, the regional one by extending affordable housing reforms to the affordable housing sector in Egypt.

Inclusive Development and Job Creation 15. The proposed activity will support SHF in designing subsidized housing programs for underserved households. In particular, the Program targets are youth, low-income, households in lagging regions, offering them a wider choice of tenure and house-types, including rental options. For example, the project will assist the SHF in the design of new housing finance products for low income individuals. The project will also support SHF in its effort to develop a mortgage guarantee scheme.

Investing in Sustainable Development 16. This project will support efforts among GoE and the private sector real estate developers to design and implement workable PPP arrangements to engage the private sector in social housing. Egypt cannot address its housing deficit without the strong participation of private sector developers in the low-income housing market. The SHF must define itself as a credible and effective partner and ensure a level playing field for all private sector entities. Achieving this will require a multi-pronged approach, including public dissemination of PPP guidelines for the SHF programs. The proposed activity will support SHF in reaching this PPP arrangement through conducting workshops and bringing experts so that Egypt can benefit from relevant international experience.

Enhancing Economic Governance 17. The proposed project will strengthen the governance and institutional set-up of the housing sector in Egypt through building a well-established SHF. The social housing sector in Egypt has suffered from poor governance, fragmented entities and programs that are weakly coordinated. The SHF will consolidate critical expertise, functions, entities, and programs related to low-income housing in one entity, as well as design new ones with the objective of ensuring effective coordination, synergies, and sound governance. 18. The project will assist GoE to establish a well governed SHF that includes appropriate internal audit function and transparency and accountability mechanisms. The scope of the internal audit function will include the assessment of risks associated with improper benefit payments. In addition to the internal audit function, the proposed activity includes three additional components focused on enhancing transparency and accountability in the SHF:  The first is the establishment of a housing M&E system that compiles a comprehensive set of housing sector indicators, collected on at least an annual basis from Governorates, housing agencies, ministries, and other relevant non-governmental organizations.  The second is the establishment of a functioning accountability and transparency mechanism.  Finally, the project will provide capacity building to the SHF to address both leakage issues and the significant housing vacancy problem through the establishment of mechanism to monitor the occupancy of housing units. This mechanism will include clear rules stipulating the limitations on the resale and occupancy of units, procedures for communicating these rules to Program beneficiaries, a post-occupancy survey on a representative sample of units, and procedures for dealing with non-complying beneficiaries. The project context section provides more details on each of the functions. 19. This activity will also support the merger of the SHF with the existing Guarantee and Subsidy Fund (GSF)4. The merger will combine both supply and demand sides of the social housing market in Egypt, allowing SHF to adopt an holistic approach in its policy making and implementation of the social housing program. The proposed activity will provide technical assistance in reviewing the legal and regulatory framework for the merger, in addition to advising on organizational issues.

VI. COMPLEMENTARITY WITH OTHER PROJECTS 20. The World Bank has approved Egypt’s “Inclusive Housing Finance Program” on May 2015. The project is in the implementation phase. The projects mainly aims at providing demand side subsidy for low income households to own or rent social housing units. The projects also aims at building the institutional capacity of SHF. The proposed activity will align with the World Bank’s program in building SHF’s institutional set-up and support the participation of the private sector in provision of social housing. The United Arab Emirates signed an agreement for a LE 6.5 billion contribution for low-income housing construction through the SHF—50,000 units have recently been completed. The World Bank will work closely with the various Arab Gulf Countries to ensure consistency and synergies in the implementation of the programs.

VII. CONTEMPLATED PARTNERSHIPS 21. The Bank will create a partnership framework with the Arab Monetary Fund as key development partner. The Arab Housing Finance Initiative (AHFI) aims to create a regional forum for sharing housing finance best practice and knowledge and to act as a focal point in delivering technical assistance to the housing finance markets of AMF member countries. The goal of this partnership framework is to: i) avoid duplications, and ii) ensure that SHF receives full support across the different components of this project. This project will also

4 The Guarantee and Subsidy Fund (GSF) was established by a Presidential Decree in 2003 with a mandate to develop innovative products to stimulate the private housing finance industry in order to grow in scale and expand the market to lower income segments. The GSF had by law three mechanisms to use: (i) issue guarantees/credit enhancement initiatives; (ii) provide upfront subsidies to qualifying beneficiaries; and (iii) engage in physical development of low-income housing for which it would receive public land free of charge. The functions of the GSF were expanded and included responsibility of subsidizing the mortgage finance activities in the field of sale or use of housing units, or leasing them through the rent-to-own system. complement the ongoing MNA Regional Affordable Housing TA Project. The two projects will be complementary in advocating housing sector reforms in selected Transition Fund countries (Tunisia, Morocco, and Egypt) to promote affordable housing through both ownership and rental.

VIII. PROJECT DESCRIPTION

A. PROJECT CONTEXT

Proposed Development Objective(s) 22. The objectives of the project are to finalize a sound institutional set-up for the SHF and to equip SHF with policy tools to develop its capacity to prepare a housing strategy, which would include steps to ensure private sector engagement. A. Key Results 23. Progress towards achieving the project’s objectives will be measured by a series of quantitative and qualitative indicators at the PDO level and at the intermediate level. Key results and indicators at the PDO level, are: (i) formulating a new housing strategy; (ii) establishing the institutional set-up of SHF; and (iii) promoting private sector engagement in social housing. 24. Key results and indicators at the intermediate level are: (i) organizing workshops on the new housing strategy; (ii) establishing an internal audit unit within SHF; (iii) establishment of a monitoring and evaluation unit within SHF;(iv) establishing of accountability and transparency mechanism within SHF; (v) drafting the operation manuals of SHF; (vi) delivery of a feasibility study on the effectiveness of the Housing Price Index; and (vii) conducting trainings for SHF staff.

B. PROJECT COMPONENTS A. Description 25. The proposed project comprises of two main components: (i) developing a housing strategy; and (ii) building the institutional settings of SHF The total cost of the project is US$ 2,780,000. 26. Component 1: SHF Policy Tools. This component will be divided into: The ultimate objective of this component is to improve the efficiency of the housing system in Egypt, by designing policies (i) addressing supply-side constraints, the mortgage market, and the land market; (ii) addressing the vacant and unfinished housing problem; and (iii) improving the coordination of housing, infrastructure and employment policies, including by providing advice on contractual arrangements with the relevant housing entities. 27. Developing a new National Housing Strategy (sub component 1.1) The proposed activity will support the GoE to develop and continuously update a new housing strategy. The strategy shall involve centralized vision and local implementation of housing policies, subsidizing citizens not units, supporting safe renting and increasing its share in the housing sector. The strategy will also target encouraging the re-entry of the vacant and closed housing units to the housing market and preserving the existing housing stock Furthermore, the strategy will aim at linking the housing units with job markets. The strategy will also address economic and social empowerment of residents of informal areas. This activity will take stock of and build on the existing body of analytical literature about the housing sector in Egypt. In addition, some diagnostic work might be needed to formulate a cohesive strategy. This will include conducting study tours, bringing experts and conducting workshops to have better exposure on best international experience. 28. Reaching a workable model for engaging the private sector in social housing (sub component 1.2) This activity aims at reaching a workable model to engage the private sector in social housing. The activity will support the GoE and the private developers in reaching consensus. The activity will include conducting several workshops to show different world experiences to both the government and private developers. It will also include the design of incentives for private landlords renovating existing units for rental to low-income households. It will also support SHF in designing guidelines for agreement between employees and investors’ associations to develop employer housing. This activity will rely on conducting consultations, workshops, study tours, and brining experts to show international good practices in engaging the private sector in social housing. Various models would be explored ranging from modification in the construction specifications to include mixed building and various building densities to mixing low and middle income buildings.

29. Developing Public Rent Component (sub component 1.3) Assistance will be provided to the SHF in order to establish efficient and equitable targeting and allocation systems, as well as maximize the links between housing programs and social and economic poverty alleviation, and labor markets (increased housing mobility, improved location of social housing). This component will require collecting data and conducting analysis of the current market state. The component will also include developing a model for private management of public rental units.

30. Developing an Housing Price Index (sub component 1.4) This activity will develop a Housing Price Index (HPI) which is critical for social housing in specific and for housing policy in Egypt in general. The HPI will also be useful to the policy makers to quantify and assess inflation and asset prices. Data will be collected from several sources and will be disaggregated by region to allow for regional HPIs. This activity will include data collection and quantitative model development that will be supported by international experts. 31. Component 2: Finalizing the institutional set-up of SHF Building the institutional Set-up of SHF will be achieved through the provision of assistance in establishing a functioning internal audit, monitoring and evaluation unit, occupancy and vacancy monitoring mechanism, transparency and accountability mechanism for SHF. The project will also be utilized in providing assistance to SHF in drafting the job descriptions of staff positions and operation manual of the different units. Finally, the project will provide training and capacity building to SHF staff. This component will be divided into:

32. Establishment of SHF internal units and functions (sub-component 2.1) This subcomponent aims at establishing SHF internal units and functions according to international best practices, which includes:

 Establishment and operation of an internal audit function within SHF providing assurance service and quality control for the ownership and rental programs affiliated with the SHF The internal audit function should cover: (i) assessment of the risks associated with improper benefit payments; (ii) use of analytical procedures, information system audit and assurance standards, and data mining tools; (iii) undertaking of spot checks and field visits to validate continued relevance of internal controls, including the quality of the complaints mechanism; and (iv) procedures for following up on the timely implementation of audit recommendations have been established

 Establishment and functioning of a housing monitoring and evaluation system (M&E) unit within SHF. A functioning M&E system is defined as: (i) a fully staffed M&E unit; (ii) an agreed set of comprehensive housing sector indicators, including social housing programs, that are collected on at least an annual basis from Governorates, housing agencies, ministries, and other relevant non- Governmental organizations; (iii) public dissemination of a minimum set of housing data on an annual basis. Multi-Year Plan and Annual Targets approved by SHF must explicitly refer to and reflect this data.

 Establishment and functioning of an accountability and transparency mechanism within SHF for implementing the Program. A functioning accountability and transparency mechanism includes: (i) a national public awareness campaign targeted at potential Program beneficiaries; (ii) standard processing times for subsidy applications; (iii) established procedures for rejected applicants to receive explanation of program requirements not complied with; (iv) monitoring of rejected applications; (v) establishment of a grievance redress mechanism; (vi) public dissemination of consolidated data on number and location of beneficiaries, SHF subsidy expenditures, and pipeline housing developments; and (vi) publication of the program audited financial statements.

 Establishment of a functioning mechanism to monitor occupancy and vacancy of housing units by households receiving demand–side housing. This system must include: (i) rules stipulating the limitations on the resale and occupancy of units; (ii) procedures for communicating these rules to Program beneficiaries; (iii) operational manual for conducting a post-occupancy survey on a representative sample of units; and (iv) procedures for dealing with non-complying beneficiaries. SHF conducts post-occupancy survey of AMP subsidy recipients based on approved mechanism to monitor occupancy of housing post-subsidy. This activity will bring experts to show international best practices on support the implementation of this mechanism.

33. Drafting the job descriptions of Staff positions of the SHF (sub-component 2.2) This activity will support SHF in drafting the job descriptions of the key staff as well as the main positions. The job descriptions will determine the required caliber of each job and the responsibilities. This sub-component will also assist in the expected merger between GSF and SHF.

34. Drafting the operation manual for SHF units (sub-component 2.3) The operation manuals of the units will indicate the procedures and processes of operation of each unit, the responsibility of units, and the flow of work. This activity will rely on the experience of international experts to provide best practices and support. Support will also be provided to GoE on the merger between GSF and SHF.

35. Capacity Building to SHF staff (sub-component 2.4) This subcomponent will provide capacity building and on the job training for SHF staff. Consultants and experts will be hired to train SHF staff on several function such as monitoring and evaluation, vacancy and occupancy monitoring, IT systems and environmental and social aspects.

IX. PROJECT FINANCING

Cost by Component Transition Country Co- Other Co- Total Fund Financing Financing (USD) (USD) (USD) (USD) Component 1: SHF Policy Tools 2,100,000 2,100,000 Component 1.1: Developing a new housing strategy 300,000 300,000 Component 1.2: Reaching a workable model for engaging 300,000 300,000 the private sector in social housing Component 1.3: Developing public rent 700,000 700,000 Component 1.4: Developing the Housing Price Index 800,000 800,000 (HPI) Component 2: Institutional Settings: 650,000 650,000 Component 2.1: Establishment and operation of SHF 300,000 300,000 internal units and function Component 2.2: Drafting the job descriptions of Staff 100,000 100,000 positions of the SHF Component 2.3: Drafting the operation manual for SHF 100,000 100,000 units Component 2.4: Capacity building for SHF staff 150,000 150,000 Total Project Cost 2,750,000 2,750,000

Budget Breakdown of Indirect Costs Requested (USD) Description Amount (USD) For grant preparation, administration and implementation support: Staff time 30,000 Staff travel Total Indirect Costs 30,000

X. FIDUCIARY AND SAFEGUARDS.

A. Fiduciary Arrangements 36. The World Bank procurement procedures will be followed in the implementation of the project activities. The Grant would be used to finance consulting services contracts, conducting workshops, and study tours. Procurement risk is rated low.

B. Safeguards 37. No safeguards issues are related to the Project activities. The proposed project will complement the current World Bank’s Inclusive Housing Finance Program for Results in Egypt. The proposed project will provide Technical Assistance to the SHF to effectively facilitate the achievement of the PforR results. The Project will be implemented all over the country and it will be limited to technical assistance and capacity building activities. No civil works or land acquisition are expected, and accordingly no adverse environmental and social impacts. An Environmental and Social System Assessment (ESSA) has been prepared for the PforR and all environmental and social aspects of the PforR are captured in the ESSA and through the implementation support of the PforR. 38. Based on the information provided at this stage that the project will not involve civil woks works activities, therefore, from social perspective no land acquisition will be needed and OP 4.12 will not be triggered. However, if the in the future the project would eventually lead to components that may entail land acquisition, a framework requiring a TOR for a resettlement instrument might be required.

C. Institutional and Implementation Arrangements

39. This project shall be executed by the World Bank to ensure continuation with early support provided the World Bank in FY2016 and complimentary with the National “Inclusive Housing Finance Program” project. The project aims at building the institutional capacity for SHF, which is still underdeveloped, and consequently has limited capacity to execute this TA. Hence, Bank execution will ensure the most efficient implementation for the TA. Furthermore, the accumulated experience of the World Bank on housing makes it most suited to deal with the complexities of the housing sector in Egypt. Therefore, this project will benefit the most from the experience of the World Bank in-house expertise in addition to the experts it is capable to mobilize. 40. The Social Housing Fund (SHF) is the implementing entity of the Social Housing Program within the Ministry which is charged with designing housing laws and regulations and social housing programs, as well as providing oversight for their implementation in consultation with relevant housing entities, and managing financial resources for social housing. It is a legal entity whose Executive Director is nominated by the Minister, and appointed by the Prime Minister. SHF will also be the implementing entity of the proposed technical assistance. 41. The World Bank will provide the SHF with technical expertise to build the institutional capacity and policy tools of the SHF. Disbursements will be made based on a pre-determined work plan and will closely monitored by the World Bank. Furthermore, World Bank, in cooperation with SHF, will be responsible for the recruitment of experts and consultants, drafting the ToRs, and ensuring proper quality control for the implementation of the project.

D. Monitoring and Evaluation of Results 42. An advisory group consisting of Finance and Markets global practice will provide strategic oversight throughout the project. Budget has been allocated to monitoring and evaluation of activities to ensure indicators are established and verified and the outputs and outcomes are attained. The current application has been reviewed by the advisory group. 18

ANNEX 1: RESULTS FRAMEWORK

Project Development Objective (PDO): The objectives of the project are to finalize a sound institutional set-up for the SHF and to equip SHF with policy tools to develop its capacity to prepare a housing strategy, which would include steps to ensure private sector engagement. Cumulative Target Description (indicator definition etc.) Values** Data Source/ Unit of Methodology PDO Level Results Indicators* Baseline Y Measure YR 1 YR 2 R 3 Indicator one: New Housing Yes/No No No No Y Annual SHF/WB Strategy es Indicator Two: Establishment and Yes/No No Yes Yes Y Annual SHF/WB SHF to have a operation of SHF internal Units es functioning and mechanisms internal audit unit, M&E unit, accountability and transparency mechanism and occupancy and vacancy monitoring mechanism Indicator Three: Reaching a PPP Yes/No No Yes Yes Y Annual SHF/WB Reaching a agreement for private sector es workable engagement model to engage the private sector in social housing Indicator Four: Developing Yes/No No Yes Yes Y Annual SHF/WB Developing the public rent model es public rent component to low income households Indicator Five: Developing and Yes/No No no Yes Y Annual WB Developing updating Housing Price Index es and continuously updating HPI 19

INTERMEDIATE RESULTS

Intermediate Result (Component One): Developing a new housing strategy Intermediate Result (Component Yes/No No No No Y Annual SHF/WB One): Developing a new housing es strategy Intermediate Result indicator One: Yes/No No No Yes Y Annual SHF/WB organization of a workshop on es Housing Strategy Intermediate Result (Component Two): Institutional Set-up of SHF

Intermediate Result indicator One: Yes/No No Yes Yes Y Annual WB Establishment and operation of an es Internal Audit Unit Intermediate Result indicator two: Yes/No No Yes Yes Y Annual WB Establishment and operation of the es M&E Unit Intermediate Result indicator Yes/No No Yes Yes Y Annual WB three: Establishment and es functioning of an accountability and transparency mechanism Intermediate Result indicator four: Yes/No No Yes Yes Y Annual WB Drafting the operation manual for es SHF units Intermediate Result indicator five: Yes/No No No Yes Y Annual WB Delivery of a feasibility study on es the effectiveness of the Housing Price Index Intermediate Result indicator six: number 0 2 2 2 Annual WB number of training delivered to SHF staff

Annex II Preparation Schedule and Resources . Preparation Schedule 20

Milestone Basic Forecast Actual AIS Release 21 March 2016 Concept Review 18-19 April 2016 Auth Appr/Negs (in 20 April 2016 20 April 2016 principle) Bank Approval 20 April 2016 20 April 2016

. Sector Unit Estimate of Resources Required from Preparation through Approval Preparation Expenses to Estimate of Resource Requirements (USD) Source of Funds Date (USD) Fixed Variable Bank Budget Trust Funds

. Team Composition Bank Staff Name Title Specialization Unit Karim Badr TTL Financial Economist GFMDR Laurent Gonnet Co-TTL Lead Financial Sector Specialist GFMDR Sara El-Nashar Economist Economist GMFDR Marja Hoek-Smith Consultant Housing Finance Expert

Claude Taffin Consultant Housing Finance Expert Francois De Recolfis Consultant Housing Finance Expert Steve W. Wan Operations Analyst Operations Analyst GFMDR Jamal Abdulla Abdel Senior Procurement Specialist Governance/Procurement GGODR Aziz Ibrahim Basalamah Social Development Specialist Social Safeguards GSURR Syed I Ahmed Lead Counsel Legal LEGAM Maiada Kassem Finance Officer Loan Operations CTRLA Mohamed Yehia Senior Financial Management Financial Management Analyst GGODR Analyst Mohammad Kandil Senior Environmentalist Specialist Environment & Natural GENDR Resources . 21