Egypt’s FRA eases rules for mortgage financing

Egypt’s Financial Regulatory Authority (FRA) announced on Wednesday new regulations allowing mortgage financing companies to partially purchase financial rights portfolios from real estate developers, a move designed to enhance sector growth and financial stability.

As part of the updated guidelines, the FRA has also reduced the required advance payment from clients to 10 per cent of the unit price, down from the previous 20 per cent, making it easier for financing companies to engage in new projects.

Under the Decree No. 306/2024, 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.

It follows an in-depth review by the FRA of the practical challenges faced by companies operating under its oversight. It highlighted the need to maintain a balance between the maturity of assets and liabilities on real estate financing companies’ balance sheets. Real estate developers’ long-term sales policies, which can extend up to 10 years, have often conflicted with the typical seven-year credit facilities provided by banks to financing companies. The new rules aim to resolve these issues and address the market demand for higher financing limits—up to 90 per cent —to purchase real estate financial portfolios, aligning with practices for retail customer financing.

Additionally, the FRA’s new rules stipulate that the transferring party must submit all relevant documentation for the sale to the financing company, ensuring transparency and due diligence. The new regulations also require real estate financing companies to verify investors’ ability to repay loans by examining their income data, with a focus on ensuring timely payment behavior over the past year.

With these changes, the FRA aims to streamline the real estate financing process, promote financial inclusion, and attract more customers, further expanding the sector’s reach and supporting Egypt’s ongoing economic growth.

Attribution: Amwal Al Ghad English