Egypt is preparing to overhaul the regulation of its real estate development market through a draft law establishing the Egyptian Federation of Real Estate Developers and introducing new rules for company classification, unit sales, buyer protection, and the handling of stalled projects.
The draft law would require developers to open a separate bank account for each project or development phase, with all payments collected from buyers under sales contracts deposited into the designated account. The funds would be restricted to the relevant project and could not be used to finance other developments or for purposes outside the account’s scope.
Under the proposed framework, withdrawals from each project account would be linked to the construction schedule and actual completion rates, based on a report prepared by the project’s appointed consultant and approved by the Egyptian Federation of Real Estate Developers.
According to a preliminary copy of the draft law reviewed by Daily News Egypt, the Ministry of Housing is holding discussions with developers on the proposed provisions before submitting the legislation to the Cabinet.
Prior approval required before marketing projects
The draft would require developers to obtain prior approval from the federation before advertising units for sale, marketing projects, or participating in real estate exhibitions.
Developers would also be required to deposit the amounts stipulated under the relevant regulations into each project’s designated account, taking into consideration the project’s size and development costs.
The proposed measures aim to strengthen oversight of developers’ use of customer funds and ensure that payments collected from buyers are channelled towards the projects for which they were intended.
Two funds proposed to protect buyers
The draft law proposes establishing two independent funds to protect customers contracting with real estate developers.
The first fund would cover customers contracting with registered real estate developers, while the second would provide protection for customers dealing with companies classified as “deemed real estate developers.”
The Prime Minister would determine the management structure of each fund, members’ contribution rates, the risks covered, and the rules governing compensation payments.
The proposed funds form part of a broader government effort to mitigate risks facing property buyers and establish mechanisms to address stalled projects and potential failures to fulfil contractual obligations.
Mandatory classification based on project size
Under the draft, companies operating in the sector would be divided into two categories: “real estate developers” and “deemed real estate developers,” based on the nature and size of their projects.
The first category would include companies developing residential projects and related activities on areas of at least five feddans, as well as commercial, administrative, service, and tourism projects covering at least one feddan.
Companies developing projects below these thresholds would fall under the “deemed real estate developer” category, provided they have previously completed projects covering at least three feddans and meet requirements related to experience, financial solvency, and their record of violations.
Existing developers would be required to regularise their status within one year of the effective date of the law’s executive regulations.
Federation registration to become a condition for project approvals
The draft would make registration with the federation a prerequisite for developers seeking approval for their projects.
Companies applying for registration would be required to include real estate development among their corporate purposes, provide evidence of land ownership or allocation, demonstrate financial solvency, and prove that they have not been subject to a final bankruptcy ruling.
Administrative authorities would also be prohibited from approving land subdivisions or issuing project-related licences before verifying that the company is registered with the federation and has obtained the appropriate classification.
The federation would maintain two electronic registers: one for real estate developers and another for companies classified as “deemed real estate developers.”
Registration and classification data would be made available to the public free of charge and updated monthly, allowing prospective buyers to verify a developer’s status before signing contracts.
Federation to monitor market and settle disputes
The proposed federation would have a broad range of responsibilities, including classifying companies, establishing a professional code of conduct, settling disputes, monitoring real estate prices, and preparing periodic reports on market activity.
The government is seeking to establish a more structured regulatory framework for the real estate development industry, particularly as the sector has expanded significantly and concerns have grown over developers’ ability to complete projects and deliver units on schedule.
The proposed framework would also give the federation a central role in monitoring market practices, strengthening professional standards, and improving transparency in dealings between developers and buyers.
New mechanisms proposed for stalled projects
The draft law also sets out procedures for dealing with developers that fail to implement their projects.
Initially, the developer would be formally notified and given an opportunity to resume construction. If the developer fails to respond or take corrective action, the federation could arrange for another company to complete the project at the original developer’s expense or resort to one of the proposed protection funds.
If the federation does not intervene, the competent administrative authority could assign the project to one or more developers registered with the federation, in accordance with rules to be specified in the executive regulations.
The proposed provisions come as the government has begun identifying stalled real estate projects and assessing their status, amid complaints from some buyers over delays in unit delivery.
CBE monitors real estate sector financing
The preparation of the draft law also coincides with regulatory efforts by the Central Bank of Egypt (CBE) to monitor bank financing extended to the real estate sector, including the relationship between financing and actual project implementation rates.
The proposed regulatory framework would introduce greater scrutiny of developers’ financial capacity, the use of customer funds, and progress in project execution, while establishing mechanisms intended to protect buyers if projects encounter financial or operational difficulties.
