Draft union law sets registration and escrow rules for developers — and leaves classification to regulations

The Housing Ministry completed a draft law to create the Egyptian Real Estate Developers Union and is now discussing it with developers before it goes to Cabinet and then the House. The draft, which EnterpriseAM has seen, makes union membership compulsory, requires a separate escrow account for every project, and dissolves the existing Real Estate Development Chamber. But it leaves the questions with the greatest bearing on the market unsettled: how developers will be classified, how they move between tiers, and whether classification decides land allocation and project size.

The old rules: The sector currently operates under Prime Minister’s Decree No. 2184 of 2022, which requires project-specific bank accounts and financial guarantee deposits scaled to project size but has no compulsory registration, developer classification, or centralized oversight. The Real Estate Development Chamber, which the draft dissolves, is a voluntary industry body under the Federation of Egyptian Chambers of Commerce and carries no regulatory or disciplinary authority. We tracked the draft law preparations from when it was first floated in May by the Housing Ministry, through the PM’s September directive to speed up progress, and the industry debate over classification and escrow that followed.

The new body

The draft law bars anyone outside the union from doing development work — government bodies are the only exception. It also stops planning authorities from approving land subdivision or issuing licenses without first checking if the developer is registered. To qualify for membership, a company must hold or be allocated a minimum plot — 5 feddans for residential projects and 1 feddan for commercial, administrative, service, or tourism developments. Smaller companies fall into a separate tier, “in the standing of developers,” and must show a prior track record to register. The draft gives existing developers a year from the regulations being signed into law to come into compliance.

What happens to the Chamber? The draft dissolves the Real Estate Development Chamber by force of law and folds its assets into two new ins. funds the draft creates.

The union itself is run by a 15-member board serving four-year terms: seven elected by developers, one elected by the smaller “in the standing of developers” tier, and six experts appointed by the minister, along with the Consumer Protection Agency head. The board can form technical committees and bring in outside experts, but the draft does not mandate independent committees for classification. This gap is critical if sitting developers are classifying their peers, Mostafa Salah, CEO of One of One, tells EnterpriseAM.

The minister retains significant authority. He approves the classification rules, budget, and bylaws, he can object to general assembly decisions, and he can suspend the board provided the matter goes to court within 10 days. A standing grievance committee chaired by a deputy head of the State Council handles appeals on registration, classification, and penalties and must be exhausted before anyone can go to court.

“We are not founding this union to stand against developers,” Salah says. “We are founding it to organize the market, encourage serious companies, and give the sector a stronger voice with the government.” The draft gives the union sole authority to represent developers before government bodies, alongside disciplinary powers that run from a warning to a five-year suspension. That combines representation of developers with judgment over them.

Why it matters: A strong institution with clear powers would make a real difference to the market, head of Savills Egypt Catesby Langer-Paget tells us, while entities that exist on paper will not deliver much. As it stands, the draft grants the union its powers and defers classification and progression to the executive regulations.

Ranked, but not sorted

The union gets the power to classify developers, but the consequences are left for later. The draft tasks it with proposing rules for ranking members by specialization and financial standing, subject to the minister’s approval, and creating a public register updated monthly. Classification determines membership fees, ins. fund contributions, how much advance payment a developer can draw from escrow, and whether they can shift money from one project to another. What it does not determine, at least not yet, is the size of projects a developer may take on, or their eligibility for land. Approval is tied to union registration and nothing else.

“The union can classify companies and stop them from taking on projects beyond their capacity,” Fathallah Fawzy, deputy chairman of the Egyptian Businessmen’s Association and head of its real estate development and contracting committee, tells EnterpriseAM. Alaa Fikry, chairman of Beta Egypt for Urban Development, expects advance classification to “carry a major operational advantage for serious developers, since it can cut the time government bodies spend reviewing land allocation files.”

Minimum plot sizes set the bar for entry, but Fawzy argues they should not set the bar for classification. Project investment should be the primary criterion for tiering, he argues. A hotel on 10k sqm can require more capital than a housing project on 5 feddans, and track record matters as much as money put in, he says. The draft does separate residential from non-residential activity in its minimum areas, but investment size appears nowhere in the registration or classification criteria — construction cost only factors in when calculating how much a developer must deposit in escrow.

Delivery record is also missing. Article 3 does not mention it, though the Housing Ministry had been studying the idea, as we reported in July. A proper framework should reward developers who actually deliver, Langer-Paget says. Tarek Bahaa, a real estate development specialist and member of the Egyptian Businessmen’s Association, puts it more bluntly: measuring success by sales volume “belongs to an era that has already passed.” Real success is cashflow management, sticking to deadlines, and running the project properly after handover, he says.

The biggest gap in the draft

The draft does not set out how a developer moves from one tier to another, leaving that to the classification rules the union will propose. A credible framework should give serious new companies a clear path to build a reputation over time and let smaller, newer developers move up by strengthening their capital, management structures, reporting, and delivery record, Langer-Paget says. “A developer classified in tier C is not necessarily a bad developer,” Salah says. “The more important question is what that classification was based on, and whether the company has a fair chance to grow, rather than finding the market closed off entirely in favor of companies that have been working for 20 or 30 years,” Salah adds.

The entry bar is lower than the debate suggests. To qualify as a developer, the text asks only for proof of actual activity on at least one project in the preceding five years, with no requirement that it was delivered. Article 42 refers the rules for counting a company’s prior development work on merger, demerger, or change of ownership structure to the executive regulations, without settling whether partnership is a route to or a condition for entry. Fikry puts the disagreement this way: “Startups won’t be excluded from the market, but they should enter through partnerships with people who have real experience in real estate development.” Salah argues mergers and joint ventures should not be the only route to a better classification.

Escrow accounts

While classification sorts who can build, escrow controls how they handle money once they do, and it is the tool the draft relies on most to protect buyers. Any member selling units before construction is complete must open a separate bank account for each project or phase and deposit buyers’ payments there and nowhere else. The developer also puts in a sum proportional to the area being sold and its construction cost. Money is released in installments against the timeline and completion rate, based on a consultant’s report approved by the union, and is shielded from seizure by the developer’s creditors. No unit may be advertised or promoted at exhibitions without the union’s authorization. Separately, maintenance fees collected from buyers go into their own independent account and are not part of the project’s funds.

This per-project structure is what Fawzy had been calling for: a separate account for each project, not each developer, so that one project’s money cannot fund another. Fikry calls using new-project down payments to finish older, stalled ones the single most damaging practice in the market, one that “has long threatened completion rates and buyer confidence.” Article 37 makes a limited exception: a top-tier developer past a set completion threshold and on schedule can apply to the union to spend part of one project’s account on another. Both the completion threshold and the allowable share are left blank.

The pressure that makes escrow necessary: payment plans stretched from two years to four in 2016 and now run to 15 years, head of strategic consulting for Africa at JLL Ayah Ghanem tells us, piling financing burdens and cashflow risk onto developers. The draft responds by requiring payment schedules to be tied to completion rates — a core term to be set by ministerial decision and included in all members’ contracts — though it sets no ceiling on how long payment periods can run.

That release mechanism could do more than protect individual buyers. Langer-Paget sees escrow playing a bigger role as sector financing widens, providing money releases against independently verified construction progress. That would link collections to work done and give buyers, banks, and institutional investors a clear view of each project’s cashflows. The draft assigns release approval to the union based on the project consultant’s report and tasks the union with checking that the account balance matches actual completion. Members must file semi-annual reports from an auditor registered with the central bank or the Financial Regulatory Authority. Whether union sign-off meets the test of an independent party, since developers elect seven of its board, is an open question (more on that below).

The union’s mandate stops at developers — buyers get no equivalent body looking out for them. Fawzy has argued that an independent national authority should oversee the developer-buyer-broker relationship, modeled on Saudi Arabia and the UAE. The draft leaves that authority out, relying instead on protections built into the union itself: a board seat for the consumer protection agency head, two ins. funds that can compensate contract holders, a mandatory mediation committee before any court case, specialized court circuits, and a mechanism to hand stalled projects to another member developer. The union’s funds count as public money under the penal code, and administrative officers can be granted judicial arrest powers for violations.

Yet to be done

No benchmark: The draft tasks the union with tracking property prices across Egypt and producing a periodic report documenting and analyzing actual transaction data and price movements to give the market a reference point. Ghanem has criticized the absence of one, arguing that relying on personal and verbal valuations of units does not reflect real value and that the market needs objective, fair valuation methods to mature.

No rent: The draft’s definition of real estate development turns on constructing buildings for the purpose of disposing of them or their units — and based on our reading, the text does not address institutional rentals or rent-to-own, leaving open how units held for rent will be treated under registration and classification. But Fikry thinks institutional rental is coming whether the text covers it or not, expecting funds and specialist companies to move in, making it a new channel supporting sector sales.

More missing details: The draft carries no registration or membership fees, no percentages under Article 37, no financial alternative to suspension, and no maximum amounts for penalties — all are to be drawn up once the substantive articles are agreed. One detail is already settled: a developer who is suspended or struck off is still allowed to complete projects already under construction, protecting buyers of units in those projects.