This increase can be fulfilled through cash or its equivalent in foreign currencies at the exchange rate announced by the Central Bank of Egypt (CBE)
The Egyptian Cabinet approved a draft decision to amend certain provisions of the executive regulations of the Real Estate Finance Law. The amendment, which modifies Cabinet Resolution No. 1 of 2001, mandates an increase in the minimum issued and paid-up capital for companies licensed to practice real estate financing activity from EGP 50 million to EGP 100 million. This increase can be fulfilled through cash or its equivalent in foreign currencies at the exchange rate announced by the Central Bank of Egypt (CBE).
The amendment specifically targets the minimum issued and paid-up capital for companies engaged in real estate financing activities, to reflect the significant changes witnessed in the global and local economy, particularly the rising costs of production requirements and raw materials in the real estate sector.
The decision highlights the need to enhance the financial solvency of real estate financing companies in light of the escalating value of real estate assets, which may become subjects of real estate financing. By raising the minimum capital requirement, the amendment aims to ensure that these companies possess the necessary resources to meet the growing demands of the market.
According to the draft resolution, companies licensed to engage in real estate financing activities are obligated to adjust their capital within a period not exceeding one year from the date of implementation. However, the Board of Directors of the Financial Supervision Authority holds the authority to extend this period for additional durations, not exceeding two years, based on valid justifications provided by the concerned company.
Furthermore, the amendment seeks to streamline the procedures for real estate financing entities to recover their financial dues in cases where clients fail to fulfill their obligations. It introduces an effective, easy, and efficient legal mechanism that motivates financing entities to provide increased financing to investors in the Egyptian real estate market.
The amendment allows for various scenarios, including cases where the real estate guarantee included in the financing agreement is not registered in favor of the financier, temporary waivers of allocation in favor of the financier, as well as cases of leasing, participation, and Murabaha.
Under the new provisions, if an investor fails to repay the amounts owed to the financing party within thirty days of the due date, they will receive a notification to settle the outstanding payments within sixty days. Should the investor remain non-compliant within the specified timeframe, the financing party is entitled to request the execution judge, in whose jurisdiction the property acts as collateral, to order execution on the said property. Additionally, a real estate agent registered with the Financial Regulatory Authority will be appointed to oversee the sale procedures under the direct supervision of the enforcement judge.
The property's market value will be determined by two real estate appraisal experts registered with the Authority, and the property will be sold at the highest available price, taking into account evaluations by the experts. The financier will receive their dues, along with late fines, expenses, and costs incurred up to the date of the sale, while the remaining proceeds will be fully refunded to the investor.
