Egypt Eases Equity Rules for Real Estate Firms Converting to Investment Funds

The Egyptian Financial Regulatory Authority (FRA) has introduced new amendments to the equity requirements for real estate development and investment companies that wish to convert into real estate investment funds. These changes, affecting requirements under FRA Board Resolution No. 179 of 2025, are designed to align with the unique operational characteristics and business cycles of real estate firms.

What Has Changed

Previously, companies needed their net equity to be at least 40% of their total assets and investments, in addition to being no less than EGP 500 million. The revised regulation simplifies this, now requiring only that a company's net equity must be at least EGP 500 million based on its latest audited financial statements. This calculation will now deduct any differences arising from asset revaluation.

Also, the FRA has introduced a new condition: loans recorded in the company's most recent audited financial statements must not exceed the maximum borrowing ratio permitted for real estate investment funds under the executive regulations of the Capital Market Law. The existing minimum capital requirement for conversion remains unchanged, stipulating an issued and paid-up capital of at least EGP 5 million or its foreign currency equivalent.

Rationale Behind the Amendment

FRA Chairman Islam Azzam explained that the previous net equity calculation, based on a proportion of total assets, did not accurately reflect the specific nature of the real estate sector. A significant portion of developers' obligations relates to project execution and delivery, often funded by advance payments from clients. These operational obligations must be clearly disclosed in the fund's information memorandum when units are offered for subscription or listed on the Egyptian Exchange (EGX).

Article 160 of the Capital Market Law's executive regulations caps borrowing by a real estate investment fund at 60% of the net value of its units, a ratio that the FRA Board of Directors can amend. The new decision accommodates these industry specifics while maintaining these borrowing limits. The revised framework is expected to be officially published in the Official Gazette and on the authority's website soon.