Adel Lofti stands outside his home in Al Nada, a luxurious gated compound near Cairo, inhaling deeply. "Here you can breathe better, you can be healthy," he says. "In the city I got headaches because of the pollution, but here I am relaxed. There is no stress."

Mr Lofti runs Al Nada, one of a growing number of high-end developments on the desert fringes of the capital that have been attracting wealthier Egyptians away from the noise and pollution of the city.

Set around golf courses or landscaped gardens and with palm trees and artificial lakes, the gated compounds, with names such as Palm Heights, Gardenia and Beverly Hills, offer western suburban lifestyles hitherto unknown in Egypt. Private guards provide security and bar outsiders.

The development of exclusive estates represents a new phenomenon for the ancient city, as the rich and powerful seek seclusion in communities laid out and run by the private sector. It is also a reflection of the increased wealth enjoyed by the elite as the economy continues on the path of robust growth.

But for most Egyptians, finding affordable homes remains a daunting challenge. Housing problems are exacerbated by decades of flawed policies and poor planning that have made for chaotic and degraded cities.

In Cairo, it has meant that both rich and poor often have to rely on their own resources to build not just their homes but their own districts. Top earners opt frequently for the private gated enclaves, while the poor live in illegally built suburbs reclaimed from the surrounding countryside.

The city is now ringed by vast areas of informal housing. These are overcrowded forests of unrendered blocks crammed so close together that their balconies almost touch above streets that are too narrow for cars to pass.

Experts estimate that well over half of Cairo's 16m people live in unplanned districts that have sprouted in breach of laws banning construction on farm land.

"It is only a slight exaggeration to say that informality is the defining characteristic of the modern Egyptian built landscape," says David Sims, an American housing expert who worked extensively in Egypt. He cites studies which found that the population of the informal areas of Cairo has been growing at more than three times the rate of the formal districts of the city.

In Bashteel, a teeming district on the western outskirts of the capital, shabby apartment blocks huddle together, keeping the unpaved streets below in perpetual shadow. The fetid smell of rubbish permeates the dusty air.

"It's only when there is an election that we can beg our member of parliament to get the government to pave a main street," says Galal Farag. "No one organises the traffic here and there are no state schools."

Sitting next to him at a coffee-shop table, Gaber Othman, who owns two buildings, recounts how he added floors gradually whenever he had saved enough.

"The local authorities came to object but all they wanted was to be paid off," he said. "There is a rate for each official. It used to cost E£1,000 [$182, €125, £87] in bribes for every floor, but now it has become E£2,000 or E£3,000."

In Bashteel, as in other informal settlements around Cairo, the state eventually had to extend utilities such as water, electricity and sewerage. But the proliferation of unplanned districts is evidence of the failed housing policies of 30 years. Unable to provide affordable housing for the poor, reluctant to relax the ban on construction on agricultural land, and lacking the authority to bulldoze illegal buildings, the state simply looked away while the informal areas mushroomed. At the same time, government-built low-cost housing in new desert towns near Cairo failed to attract a critical mass of residents bec-ause of poor transport, the absence of services and restrictions on opening the types of small business that flourish in areas like Bashteel.

"The concept was always building the new Egypt that would be modern and organised," said Mr Sims.

"But the chance of the new towns working has been undercut by terrible planning and unnecessarily high -standards."

A new reforming cabinet in office since 2004 has been trying to tackle the accumulated problems, but it is a slow process. Plans include redrawing the boundaries of towns and villages to make more land available for orderly urban expansion. President Hosni Mubarak has launched a programme to build 500,000 low-cost housing units over six years.

But as the government struggles to bring order into the chaos, crises that are the direct result of poor planning continue to grow. In Cairo, those who paid heavily for their luxurious homes have been finding, in common with poorer residents, that the city's infrastructure is unable to cope with expansion. Rich and poor alike were subject to water cuts last summer in soaring temperatures that left some communities with little or no water for days at a time.