Home | | Contact Us

A New Decree Regarding Real Estate

A New Decree Regarding Real Estate Activities Guarantee and Aid Fund
The Prime Minister issued decree No. 338 of 2013 delegating the Minister of Housing and Urban Communities in exercising his authorities as the competent Minister, as stipulated in Law No. 10 of 2009, in regards to the Real Estate Activities Guarantee and Aid Fund (the “Decree”).[1] In accordance with Article 1 of Law No. 10 of 2009 regulating the supervision of non-banking financial instruments and markets,[2] a Presidential Decree shall be issued deciding the Minister competent to implement this law’s provisions. In compliance with this Article, the President issued Decree No. 181 of 2012 setting the Prime Minister as the competent Minister.[3] Later, the Prime Minister issued decree No. 991 of 2012 delegating competence to the Minister of Investment. However, the Prime Minister issued the recent Decree transferring the competent Ministerial authorities from the Minister of Investment to the Minister of Housing and Urban Communities especially in regards to the Real Estate Activities Guarantee and Aid Fund. This moves discussion to the Real Estate Activities Guarantee and Aid Fund and what competencies shall be exercised by the Minister of Housing and Urban Communities in execution of the above mentioned decree.
The Fund and its Purpose
The Real Estate Activities Guarantee and Aid Fund was initiated based upon Article 35 of Law No. 148 of 2001 on Mortgage Finance.[4] The same article specified the competencies of the fund as follows: "The Fund is competent to aid Real Estate Funding activities for lower income individuals' residence acquisitions, through the Fund's incurrence of part of the installment, lowering the burden of financing to reasonable limits not exceeding a quarter of their income". Article 6 of the Executive Regulations issued by the Cabinet of Ministries' Decree No. 1 of 2001[5] explained the statement "lower income individuals", while enforcing the law's provisions. This was followed by Prime Ministerial Decree No 1864 of 2008 substituting Article 6 of the Executive Regulations[6] with the following Article: "The investor benefiting from applying Article 35 of the Real Estate Funding Law and this Executive Regulation is any person receiving a total annual income less than twenty-one thousand EGP or thirty thousand EGP in the event of having a wife and minors. Aid priority shall be providing an economic residence for the lower income investor who did not receive any financial support previously and has no residential unit". In application of the last paragraph of Article 35 of Law No 148 of 2001, the President issued Decree No. 4 of 2003,[7] which regulated the Real Estate Activities Guarantee and Aid Fund in regards to its Board of Directors composition, the competencies to be exercised by the Fund to attain its objectives and referencing the competent Minister's authority to issue the Statute of the Fund based on the Fund's Board of Directors presentation. Presidential Decree No. 272 of 2009[8] amended some of the preceding Decree’s provisions with regards the Board of Directors composition and the Fund's competencies.
The Fund Statute
The Minister of Investment issued the Statute of the Fund through Decision No. 152 of 2010,[9] as he was the competent Minister at the time. The Statute specified a group of competencies, with the most important being:
  • Receiving lands specified by the Government free of charge for establishing economic level residents with public utilities in return for half its real cost. This occurs through coordinating with the Egyptian Financial Supervisory Authority (“EFSA”), New Urban Communities Authority, and other concerned authorities based on the level of demand and available resources.
  • Determining the value of aid and its percentage of the funding installments aiming to lower the funding burden to limits reasonable for lower income individuals and without exceeding the legal limits, taking in consideration the land's value and half of utilities cost as a portion of the aid whether added or deducted, the fund is authorized to undertake contracting procedures with beneficiaries as well. The aid can be in three forms: first, a direct deduction from the unit's value; second, a deducted percentage of the funding installment lowering burden to accounted limits; and finally, a contribution in covering the costs of insurance against risk of default.
  • Setting rules and procedures for proving and confirming reasons of investors' default from paying their Real Estate installments, including low income investors, as well as the procedures taken to guarantee payments of defaulting investors.
The Fund Statute offered the Fund's Board of Directors the rights of management, and authorized the competent Minister to appoint the Chairman and his Deputy after consulting the Egyptian Financial Supervisory Authority Board of Directors. Besides the Chairman and his Deputy, the Board shall be composed of representatives of the Finance, Economic Development, Investment, and Housing and Urban Communities Ministries, a representative of the Central Bank, a representative of the Egyptian Financial Supervisory Authority, and two additional experts. The Statute authorized the competent Minister, (in addition to Chairman and Deputy appointments) a group of competencies including defining the competencies of the Fund's Board of Directors while setting the public policy of Real Estate funding activities, instituting Fund branches and offices in the Governorates' capitals, the right to invite the Board of Directors for a meeting once per month, and the right to suggest topics for discussion.
A Change in Policy
In conclusion, based upon the recent Decree, the Minister of Housing and Urban Communities is responsible for exercising the above competencies. This suggests a change in governmental policy, particularly regarding the purpose of the Fund and how it is meant to operate. Before the tenure of the Minister of Investment, the Fund served as a financial institution under the authority of EFSA, operating in a funding rather than engineering capacity. However, the change in the Fund’s supervisory authority, from EFSA to the Minister of Housing and Urban Communities, suggests a governmental policy shift, altering the fund’s purpose from a financial institution to an engineering and housing institution. This is a major step backwards as the Fund’s purpose should be to guarantee funding, rather than to building housing units.   [1] Prime Minister’s Decree No. 338/2013 delegating the Minister of Housing and Urban Communities in exercising his authorities as the competent Minister in regards to the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 14 (bis), 4 April 2013. [2] Law No. 10/2009 on the Supervision of Non-Banking Financial Instruments and Markets, Egyptian Gazette, Issue No. 9 (bis), 1 March 2009. [3] Presidential Decree No. 181/2012 setting the Prime Minister as the competent Minister to implement the provision of Law No. 10/2009, Egyptian Gazette, Issue No. 37 bis (b), 19 September 2012. [4] Law No. 148 of 2001 on Mortgage Finance, Egyptian Gazette, Issue No. 25 (bis), 24 June 2001. [5] Cabinet of Ministers’ Decree No. 1/2001 enacting the Executive Regulations of the Mortgage Finance Law, Egyptian Gazette, Issue No. 282 (bis), 9 December 2001. [6] Prime Minister’s Decree No. 1864/2008 amending certain provision of the Executive Regulations of the Mortgage Finance Law, Egyptian Gazette, Issue No. 28 bis (a), 10 July 2008. [7] Presidential Decree No. 4/2003 on the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 1 (bis), 5 January 2003. [8] Presidential Decree No. 272/2009 amending certain provisions of Presidential Decree No. 4/2003 on the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 33 (bis), 16 August 2009. [9] Minister of Investment’s Decision No. 152/2010 issuing the Statute of the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 217, 20 September 2010.
The Prime Minister issued decree No. 338 of 2013 delegating the Minister of Housing and Urban Communities in exercising his authorities as the competent Minister, as stipulated in Law No. 10 of 2009, in regards to the Real Estate Activities Guarantee and Aid Fund (the “Decree”).[1] In accordance with Article 1 of Law No. 10 of 2009 regulating the supervision of non-banking financial instruments and markets,[2] a Presidential Decree shall be issued deciding the Minister competent to implement this law’s provisions. In compliance with this Article, the President issued Decree No. 181 of 2012 setting the Prime Minister as the competent Minister.[3] Later, the Prime Minister issued decree No. 991 of 2012 delegating competence to the Minister of Investment. However, the Prime Minister issued the recent Decree transferring the competent Ministerial authorities from the Minister of Investment to the Minister of Housing and Urban Communities especially in regards to the Real Estate Activities Guarantee and Aid Fund. This moves discussion to the Real Estate Activities Guarantee and Aid Fund and what competencies shall be exercised by the Minister of Housing and Urban Communities in execution of the above mentioned decree.
The Fund and its Purpose
The Real Estate Activities Guarantee and Aid Fund was initiated based upon Article 35 of Law No. 148 of 2001 on Mortgage Finance.[4] The same article specified the competencies of the fund as follows: "The Fund is competent to aid Real Estate Funding activities for lower income individuals' residence acquisitions, through the Fund's incurrence of part of the installment, lowering the burden of financing to reasonable limits not exceeding a quarter of their income". Article 6 of the Executive Regulations issued by the Cabinet of Ministries' Decree No. 1 of 2001[5] explained the statement "lower income individuals", while enforcing the law's provisions. This was followed by Prime Ministerial Decree No 1864 of 2008 substituting Article 6 of the Executive Regulations[6] with the following Article: "The investor benefiting from applying Article 35 of the Real Estate Funding Law and this Executive Regulation is any person receiving a total annual income less than twenty-one thousand EGP or thirty thousand EGP in the event of having a wife and minors. Aid priority shall be providing an economic residence for the lower income investor who did not receive any financial support previously and has no residential unit". In application of the last paragraph of Article 35 of Law No 148 of 2001, the President issued Decree No. 4 of 2003,[7] which regulated the Real Estate Activities Guarantee and Aid Fund in regards to its Board of Directors composition, the competencies to be exercised by the Fund to attain its objectives and referencing the competent Minister's authority to issue the Statute of the Fund based on the Fund's Board of Directors presentation. Presidential Decree No. 272 of 2009[8] amended some of the preceding Decree’s provisions with regards the Board of Directors composition and the Fund's competencies.
The Fund Statute
The Minister of Investment issued the Statute of the Fund through Decision No. 152 of 2010,[9] as he was the competent Minister at the time. The Statute specified a group of competencies, with the most important being:
  • Receiving lands specified by the Government free of charge for establishing economic level residents with public utilities in return for half its real cost. This occurs through coordinating with the Egyptian Financial Supervisory Authority (“EFSA”), New Urban Communities Authority, and other concerned authorities based on the level of demand and available resources.
  • Determining the value of aid and its percentage of the funding installments aiming to lower the funding burden to limits reasonable for lower income individuals and without exceeding the legal limits, taking in consideration the land's value and half of utilities cost as a portion of the aid whether added or deducted, the fund is authorized to undertake contracting procedures with beneficiaries as well. The aid can be in three forms: first, a direct deduction from the unit's value; second, a deducted percentage of the funding installment lowering burden to accounted limits; and finally, a contribution in covering the costs of insurance against risk of default.
  • Setting rules and procedures for proving and confirming reasons of investors' default from paying their Real Estate installments, including low income investors, as well as the procedures taken to guarantee payments of defaulting investors.
The Fund Statute offered the Fund's Board of Directors the rights of management, and authorized the competent Minister to appoint the Chairman and his Deputy after consulting the Egyptian Financial Supervisory Authority Board of Directors. Besides the Chairman and his Deputy, the Board shall be composed of representatives of the Finance, Economic Development, Investment, and Housing and Urban Communities Ministries, a representative of the Central Bank, a representative of the Egyptian Financial Supervisory Authority, and two additional experts. The Statute authorized the competent Minister, (in addition to Chairman and Deputy appointments) a group of competencies including defining the competencies of the Fund's Board of Directors while setting the public policy of Real Estate funding activities, instituting Fund branches and offices in the Governorates' capitals, the right to invite the Board of Directors for a meeting once per month, and the right to suggest topics for discussion.
A Change in Policy
In conclusion, based upon the recent Decree, the Minister of Housing and Urban Communities is responsible for exercising the above competencies. This suggests a change in governmental policy, particularly regarding the purpose of the Fund and how it is meant to operate. Before the tenure of the Minister of Investment, the Fund served as a financial institution under the authority of EFSA, operating in a funding rather than engineering capacity. However, the change in the Fund’s supervisory authority, from EFSA to the Minister of Housing and Urban Communities, suggests a governmental policy shift, altering the fund’s purpose from a financial institution to an engineering and housing institution. This is a major step backwards as the Fund’s purpose should be to guarantee funding, rather than to building housing units.   [1] Prime Minister’s Decree No. 338/2013 delegating the Minister of Housing and Urban Communities in exercising his authorities as the competent Minister in regards to the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 14 (bis), 4 April 2013. [2] Law No. 10/2009 on the Supervision of Non-Banking Financial Instruments and Markets, Egyptian Gazette, Issue No. 9 (bis), 1 March 2009. [3] Presidential Decree No. 181/2012 setting the Prime Minister as the competent Minister to implement the provision of Law No. 10/2009, Egyptian Gazette, Issue No. 37 bis (b), 19 September 2012. [4] Law No. 148 of 2001 on Mortgage Finance, Egyptian Gazette, Issue No. 25 (bis), 24 June 2001. [5] Cabinet of Ministers’ Decree No. 1/2001 enacting the Executive Regulations of the Mortgage Finance Law, Egyptian Gazette, Issue No. 282 (bis), 9 December 2001. [6] Prime Minister’s Decree No. 1864/2008 amending certain provision of the Executive Regulations of the Mortgage Finance Law, Egyptian Gazette, Issue No. 28 bis (a), 10 July 2008. [7] Presidential Decree No. 4/2003 on the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 1 (bis), 5 January 2003. [8] Presidential Decree No. 272/2009 amending certain provisions of Presidential Decree No. 4/2003 on the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 33 (bis), 16 August 2009. [9] Minister of Investment’s Decision No. 152/2010 issuing the Statute of the Real Estate Activities Guarantee and Aid Fund, Egyptian Gazette, Issue No. 217, 20 September 2010.