Egypt's Draft Property Law Would Lock Off-Plan Payments Into a Project-Only Bank Account

Egypt is preparing a draft law that would require property developers to hold buyers' money in a separate bank account for each project, with withdrawals tied to how much of the building has actually gone up. The Ministry of Housing is discussing the provisions with developers before the legislation goes to Cabinet, according to Daily News Egypt, which reviewed a preliminary copy of the text.

Under the draft, a developer would open a separate bank account for each project or development phase, and every payment collected from a buyer under a sales contract would be deposited into that account. The money could not be used to finance other developments or spent outside the account's purpose. Withdrawals 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 a new Egyptian Federation of Real Estate Developers, which the law would create.

The draft would also tighten who is allowed to sell at all:

• Developers would need the federation's prior approval before advertising units for sale, marketing a project or taking part in a real estate exhibition
• Registration with the federation would become a prerequisite for project approval, requiring evidence of land ownership or allocation, proof of financial solvency and no final bankruptcy ruling
• Administrative authorities would be barred from approving land subdivisions or issuing project licences before verifying that a company is registered
• Existing developers would have one year from the effective date of the executive regulations to regularise their status

Two independent funds would be set up to compensate buyers: one covering customers of registered developers, the other customers of companies classed as "deemed real estate developers". The Prime Minister would determine each fund's management structure, members' contribution rates, the risks covered and the rules for paying compensation. Daily News Egypt reports that the funds form part of a wider government effort to deal with stalled projects and developers who fail to meet their contractual obligations.

The draft splits the sector in two. "Real estate developers" would be companies building residential projects on at least five feddans, or commercial, administrative, service or tourism projects on at least one feddan. Companies below those thresholds would fall under "deemed real estate developers", provided they have already completed projects covering at least three feddans and meet requirements on experience, financial solvency and their record of violations.

Much is still unknown. The report does not say when the draft will reach Cabinet, what the fund contributions would cost developers, or when the law might take effect, and the text itself has not been published. Nothing in the draft as reported singles out any governorate — the one-feddan threshold for tourism projects covers resort development of the kind built along the Red Sea, and the account rule would apply to off-plan sales in Hurghada and El Gouna the same way it applies in Cairo. For anyone on this coast weighing an off-plan apartment, the question the draft is trying to answer is whether their instalments sit in an account tied to the building they are buying into.