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When the Muslims conquered Egypt, Alexandria was the capital of the country. When the Muslims conquered Alexandria, most of the Byzantine population eacuated the city. The vacant houses were occupied by the Muslims. Alexandria was the queen of cities. Amr bin Al-Aas and the other Muslims with him were much attracted by the city. Amr wanted to make Alexandria the capital of Muslim Egypt.

Amr wrote to Umar seeking his permission to make Alexandria the capital of the province. Umar was of the view that Alexandria being a maritime city would not be suitable for the Arabs. He did not give the permission asked for. He suggested that the capital should be established further inland at a central place, where no mass of water intervened between it and Arabia.

Amr accordingly proceeded to choose a suitable site for the capital of Egypt. His choice fell on the site where he had pitched his tent at the time of the battle of Babylon. His tent had been fixed about a quarter of a mile north east of the fort. After the battle was over, and the army was to march to Alexandria when the men began to pull down the tent and pack it for the journey it was found that a dove had nested on top of the tent and fail eggs. Amr ordered that the tent should remain standing where it was. The army marched away but the tent remained standing in the plain of Babylon.

In this unusual episode of the dove and its nest, Amr saw a sign from the Heaven. He decided " Where the dove laid its nest, let the people build their city". As Amr's tent was to be the focal point of the city, the city was called Fustat, which in Arabic means the tent.

The first structure to be built was the mosque which later became famous as Mosque of Amr bin Al-Aas. The plot for the mosque was so chosen that the Mihrab and the pulpit came to be located on the exact spot where the tent had stood. The mosque was completed in 642 A.D. The mosque had a pulpit from where Amr as the leader addressed the congregation. Umar did not appreciate the idea of a pulpit. He wrote to Amr:

"It has come to my notice that you have built a pulpit by means of which you stand above the shoulders of the Muslims, which is the same as your standing with the Muslims under your heel. I command you to dismantle the pulpit."

Amr complied with the order.

Amr built a house for himself next to the gate of the mosque. Adjoining this house were the houses of Companions including Zubair, Ubaida, Abu Zar, Abu Ayub Ansari, Abdullah the son of Umar and Abdullah the son of Amr bin Al-Aas. Amr reserved a plot for the construction of a house for Umar. Umar wrote that he had no idea of residing in Egypt. Under his orders the plot was utilised for the construction of a market.

All houses were of one storey. No one was allowed to construct' a palatial building. Kharija bin Huzafa, however, constructed a two storeyed house. When this was brought to the notice of Umar, he wrote to Amr:

"It has come to my notice that Kharija bin Huzafa has built an upper storey. Perhaps Kharija wishes to see into the private apartments of his neighbours. When you get this letter demolish the upper storey".

The order was complied with.

The city of Fustat was built east of Babylon. In due course Fustat extended to include the old town of Babylon.