CBE Extends Mortgage Finance Initia

On 28 January 2019, the Central Bank of Egypt (“CBE”) issued a circular[1] extending its 2014 mortgage finance initiative for low-income individuals despite the exhaustion of the funds allocated to it. Whereas the initiative originally targeted low, middle, and above middle-income individuals, it is now to continue only for low-income individuals in exclusion of other beneficiaries named in the original CBE circular and its subsequent amendments.

Background

In February 2014, CBE launched a Mortgage Finance Initiative for Low and Middle-Income Individuals (the “Initiative”).[2] The seven-point Initiative involved allocating EGP 10 billion for mortgage finance activities directed to low- and middle-income individuals for a period of 20 years. Under the Initiative banks were to lend the allocated amount to targeted beneficiaries primarily for the purchasing of housing units, against reduced interest rates ranging from 5% to 10.5% per annum, based on whether an individual falls under the threshold for lower, middle, or above-middle income. The Initiative also allowed banks to direct their funds to mortgage finance companies under certain conditions. The Initiative has since been amended a number of times. In parallel with threshold increases applied by the Ministry of Housing’s Mortgage Finance Fund, the thresholds for incomes that fall within the low to above-middle income categories under the Initiative were raised in June 2017, and the maximum price of units that can be offered under that scheme was increased.[3] CBE then raised the amount allocated for bank mortgage-finance activities to low- and middle-income individuals from EGP 10 billion to EGP 20 billion in October 2017, and exempted injured military and police personnel, and the families of martyrs in either service, from adhering to the maximum income threshold when applying for residential units through the Ministry of Housing’s Social Housing Program.[4]

The New CBE Circular

The new circular states that CBE is extending its Mortgage Finance Initiative to low-income individuals in light of the exhaustion of the funds that were allocated to it (EGP 20billion). It explicitly states that the initiative is to continue – with respect to low-income individuals – however without allocating a new amount to the initiative.   [1] CBE Circular dated 28 January 2019 extending the Mortgage Finance Initiative for low-income individuals only, available through this link (in Arabic). [2] CBE Circular dated 19 February 2014 on Mortgage Finance Initiative to Low- and Middle-Income Individuals, available through this link (in Arabic). [3] CBE Circular dated 22 June 2017 amending the Mortgage Finance Initiative to Low- and Middle-Income Individuals, available through this link (in Arabic). [4] CBE Circular dated 8 October 2017 raising the amount allocated mortgage-finance initiative and exempting injured military and police personnel, and the families of martyrs in either service, from adhering to the maximum income threshold, available through this link (in Arabic).