Egypt To Reportedly Introduce Crowdfunding Framework, Focused On Real Estate

January 19, 2025

 

Egypt’s Financial Regulatory Authority (FRA) has begun preparing the country’s first regulatory framework for crowdfunding in real estate investment funds, to diversify financing sources for companies and offer a new investment product for individuals, Chairman Mohamed Farid reportedly said on January 16.

Focus on real estate

Farid announced that crowdfunding will be initially introduced in the real estate sector, driven by increasing investment interest from individuals, he told Hapi Journal in an interview. The initiative aims to offer an investment tool that expands the ownership base while ensuring client protection and service provider efficiency within a regulated framework.

He noted that the FRA has held several discussions with real estate developers and property investment entities to define crowdfunding parameters in Egypt. The FRA is also studying international frameworks and successful global crowdfunding models to create a comprehensive approach that would later be applied to other sectors.

New regulations for mortgage financing firms

In a related development, the FRA announced new regulations allowing mortgage financing companies to partially purchase financial rights portfolios from real estate developers to boost sector growth and financial stability.

As part of the updated guidelines, the FRA has reduced the required advance payment from clients to 10% of the unit price, down from the previous 20%, easing the ability of financing companies to engage in new projects. The new amendments aim to provide real estate financing companies with greater flexibility, allowing them to purchase part of the financial portfolios derived from real estate developers’ sales to customers. The new decree is expected to stimulate sector growth by improving financial safety and supporting the expansion of financing options, according to the statement.

Following a thorough review of industry challenges, the FRA introduced new rules to address the mismatch between real estate developers’ long-term sales policies and the typical seven-year bank credit facilities provided to financing companies. The regulations aim to resolve these issues and meet market demand for higher financing limits—up to 90%—for purchasing real estate financial portfolios.

These changes aim to streamline the real estate financing process, promote financial inclusion, and support Egypt’s economic growth, the statement added. The FRA clarified that to qualify for the reduced payment requirement, investors must show a history of consistent payments and provide a credit report from a licensed agency confirming their regular payment behavior, in line with FRA guidelines.

Key background

Egypt’s real estate market market is expected to reach a value of $1.6 trillion by 2025, according to Statista. The residential real estate sector is expected to dominate the market with a projected market volume of $1.18 trillion in 2025. It is anticipated that the market will experience an annual growth rate (CAGR 2025-2029) of 6.99%, resulting in a market volume of $2.07 trillion by 2029.

According to a JLL report on Egypt’s housing market for the third quarter of 2024, year-over-year sales prices in the 6th of October City rose by 146%, while in New Cairo, they increased by 148%. The total real estate stock reached 288,000 units.

“The country is gradually moving toward recovery, largely driven by significant foreign direct investment (FDI) inflows and the recent approval of a $820 million loan from the International Monetary Fund (IMF), aimed at restoring macroeconomic stability,” the report said. “Consequently, the market outlook remains optimistic, with expectations for revival in the medium to long term as it fully adapts to these new reforms.” stated the JLL report

According to Property Finder’s Market Watch, the real estate and construction sectors contributed 18.5% to Egypt’s Gross Domestic Product (GDP). In 2023, the number of residential and mixed-use real estate projects reached 543, valued at $363 million, representing 49% of the total projects and 82% of total investments.