Egypt’s financial regulator has replaced the 40%-of-assets equity test for developers converting into property funds with a flat EGP 500m floor
The Financial Regulatory Authority swapped a ratio-based solvency test for an absolute one, and the reason it gave is the part a buyer should read: a developer’s largest obligations are the advance payments its own customers have already made against homes that are not built yet.
What happened
- The Financial Regulatory Authority, chaired by Islam Azzam, has amended some of the conditions governing the conversion of real estate investment and development companies into real estate investment funds, previously set out under FRA Board Decision No. 179 of 2025. — Daily News Egypt,
- A company’s net equity must now be at least EGP 500m according to its latest approved financial statements. Previously, the requirement stipulated that net equity should amount to at least 40% of the company’s total assets and investments, subject to a minimum of EGP 500m. — Daily News Egypt,
- Net equity is calculated after excluding asset revaluation differences, with the remaining equity used to subscribe to the fund’s units after conversion. — Amwal Al Ghad,
- A new requirement was added: the value of loans outstanding in the company’s latest approved financial statements may not exceed the maximum borrowing ratio permitted for real estate investment funds under the executive regulations of the Capital Market Law. Under Article 160 of those regulations, borrowing by a real estate investment fund may not exceed 60% of the net value of the fund’s investment certificates, although the FRA’s board may amend this ratio. — Daily News Egypt,
- The new decision retains the first equity requirement for conversion into a real estate investment fund company, under which the company’s issued and paid-up capital must be at least EGP 5m or its equivalent in foreign currencies. — Daily News Egypt,
- Azzam said the amendment draws on practical experience gained from implementing the requirements governing the conversion of real estate development companies into real estate investment funds. — Daily News Egypt,
- Azzam said calculating net equity as a share of total assets does not fit the operating nature of real estate development companies, which carry contractual obligations to execute and deliver projects against advance payments received from customers — operating obligations that must be disclosed in the fund’s prospectus. — Amwal Al Ghad,
The KÂMO View
Buried in a technical rule about fund conversions is the clearest statement any Egyptian regulator has made about what an off-plan instalment actually is: not the developer’s capital, but the developer’s obligation to you. That is why the FRA has stopped measuring a developer’s equity as a share of its assets. A developer’s balance sheet is swollen on both sides — land and work-in-progress on one, customer money owed as finished homes on the other — and a ratio built on total assets flatters exactly the company that has pre-sold the most and built the least. The regulator replaced it with a number that cannot be inflated by selling harder: EGP 500m of net equity, after stripping out asset revaluation gains, plus a cap on borrowing.
Read plainly, this changes nothing for a buyer directly. It is an entry test for developers who want to convert into a regulated property fund, not a protection attached to your contract, and Egypt still has no statutory escrow requirement holding your instalments against certified construction progress. What it gives you is a vocabulary the regulator itself now uses. When you are shown a developer’s financials — and you should ask for them before an off-plan signature, not after — the line to find is customer advances, because that is other buyers’ money already committed to homes still owed. Ask what net equity looks like once revaluation gains on land are excluded, and what the company owes its lenders. A developer that would fail the FRA’s own EGP 500m test is not thereby a bad developer; plenty of competent smaller firms would. But it tells you which questions the answer has to be strong on: the delivery record on your specific phase, the contractual handover date in writing, and what the contract says happens when that date slips.
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The KÂMO Research Desk. “Egypt’s financial regulator has replaced the 40%-of-assets equity test for developers converting into property funds with a flat EGP 500m floor.” KÂMO Market News, 17 August 2026. https://kamoproperty.com/news/fra-developer-fund-conversion-equity-rule/