An Egyptian court upheld on Tuesday a ruling that threatens Talaat Moustafa Group's (TMG) flagship project on the outskirts of Cairo, sending shares in Egypt's biggest listed developer sharply lower.   

Building has already started on the Madinaty development, which is meant to include homes, schools, hotels and a golf course.   

The High Administrative Court upheld a June ruling that New Urban Communities Authority (NUCA), a housing ministry body, broke the law when it sold land for the Madinaty project to a TMG unit and rejected appeals by NUCA and TMG.

Shares in the firm fell 7 percent to 6.89 Egyptian pounds by 1106 GMT, while the main index was up 0.1 percent.

"This was a bad surprise for investors," said one Dubai-based trader who follows the stock.

In June, the lower court said the 8,300-acre plot should have been put up for public auction.

"The appeal submitted by Talaat Moustafa and the New Urban Communities Authority has been rejected. The ruling of the administrative court for the nullification of the Madinaty contract is upheld," Judge Mounir Gowaifal said.
   
TMG executives and state officials have repeatedly said the case would not affect building on the project, nor the company's commitments to its customers, but some analysts have said it could slow sales on the development.

Last month, Egypt's general prosecutor dropped a separate investigation filed by parliament members that had accused NUCA of wasting state money when it sold the land for the Madinaty project.

TMG executives were not immediately available to comment. - Reuters