Neither. Specifically, the settlement of a town had to take two main considerations into mind: Ancient Egyptian cities were built according to their proximity to water and the height it was to be built above because of the flooding of the Nile. The material they used to build cities were mud-brick and were susceptible to water and damp conditions. Therefore, the building of a city needed careful planning which led to houses and towns being built on a more elevated plain. However, the ancient Egyptians did build temples but the nobility did not live there. Nobility lived in larger houses or palaces consisting of multiple stories.
There were also cities called “Temple Districts” Temple districts were planned to be symmetrical and walls surrounded them. For example, at the Hotep-senusret the brick wall on three sides of the temple was 12 metres thick and lined with limestone for durability. Avenues leading through the city to the temple district were wide which made the town suitable for processions. Originally most temples were surrounded by an empty space, but over time houses were built right up to the outer temple walls.