Arab Finance: The Financial Regulatory Authority (FRA) has amended the requirements for real estate investment and development companies seeking to convert into real estate investment funds, as per a statement.
Under the new rules, a company’s net equity must be at least EGP 500 million based on its latest audited financial statements, replacing a previous requirement that net equity represent at least 40% of the company’s total assets and investments, while also being no less than EGP 500 million.
The amendment applies to requirements established under FRA Board Resolution No. 179 of 2025 and is intended to account for the nature of real estate companies’ operations, business cycles, and contractual obligations to clients, which are settled through project execution and delivery.
Net equity will be calculated after deducting any differences resulting from asset revaluation. The remaining net equity will be used to subscribe to the fund’s units following the conversion, as reflected in financial statements approved by the fund company’s general assembly.
The FRA has also introduced a requirement that loans recorded in a company’s latest 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 decision maintains the existing minimum capital requirement, under which a company seeking to convert into a real estate investment fund company must have issued and paid-up capital of at least EGP 5 million or its equivalent in foreign currency.
FRA Chairman Islam Azzam said the amendment follows practical experience in applying the conversion requirements to real estate development companies. According to Azzam, calculating net equity as a proportion of total assets and investments did not adequately reflect the nature and operating characteristics of the sector.
A significant portion of real estate developers’ obligations is linked to project execution and delivery against advance payments received from clients. These operational obligations must be disclosed in the fund’s information memorandum when its units are offered for subscription or listed on the Egyptian Exchange (EGX).
The revised framework seeks to accommodate these characteristics while maintaining the borrowing requirements set under the executive regulations of the Capital Market Law.
Under Article 160 of the regulations, borrowing by a real estate investment fund is capped at 60% of the net value of its units, although the ratio may be amended by a decision of the FRA’s Board of Directors.
The new decision is expected to be published in the Official Gazette and on the authority’s website in the coming days.
