Real estate buyers are reselling the contracts for their units, and some analysts are more concerned than others. Separately, the Financial Regulatory Authority (FRA) is reminding those same buyers to read the fine print on their contracts, as they may not realize that developers have the right to assign those contracts to mortgage financiers — a move that could impact their credit score.

REMEMBER- Last week, we explored how a Developers Union law, escrow rules, and a classification push are being built to clear out developers that can’t deliver. Now we’re unpacking the buyer’s side.

How reselling works: Buyers purchase contracts that are paid off in installments, which means they don’t own the unit until they finish paying. If they want out of the contract before that point, they’ve got two options: cancel it (and bear a hefty fee) or resell it to someone else (and the developer takes a cut).

Some are worried about how many buyers are reselling. “We’ve logged more than 9.8k unit assignment filings, with an estimated value of EGP 72.2 bn — EGP 53.6 bn at contract value. Most of it is concentrated in the first two years after purchase, which tells you buyers are struggling to keep up with installments,” Mahmoud Ammar, founder and CEO of real estate platform Aqar Exit, tells us.

But others aren’t as concerned. “Those numbers are still limited next to total market sales volume,” says Mohamed Albostany, president of the New Cairo and New Capital Developers Association, highlighting that the resale demand often reflects buyers rotating into other assets to upgrade their investment. “It isn’t always a sign of payment default,” he says.

And don’t worry about a real estate bubble, said Hesham Talaat Moustafa, Talaat Moustafa Group chairman, during an interview with MBC Masr. He pointed to structural demand from population growth, high cash-collection rates among major developers, and a sector that contributes roughly 22% of GDP (watch, runtime: 25:38).

Read the fine print

The FRA wants people to read their contracts. As part of its regulatory and supervisory mandate over non-bank financial activities, consumer protection, and complaint investigation, the FRA said it identified numerous instances of real estate clients failing to pay sufficient attention to key contract terms, and it urged buyers to review contracts carefully, especially the “assignment of rights” clause.

Shortly after issuing that reminder, the FRA had to issue a clarification, stating that media coverage has been inaccurate. The FRA hasn’t issued any new decisions or directives, and assignment-of-rights clauses remain fully permitted under the Civil Code.

Most current developer contracts let the developer assign the full contract, or the financial rights arising from it, to a mortgage finance company. Mortgage finance companies — as licensed credit providers — must report clients’ outstanding debt balances monthly to the I-Score credit bureau, in line with FRA and Central Bank of Egypt directives. This makes a buyer’s installment obligations visible to every credit provider tracking that debtor, which can affect their bank creditworthiness.

Both the developer and the financing company are obligated to notify the buyer of the assignment and the revised mechanism for paying remaining installments, the FRA said. Under Article 305 of the Civil Code, an assignment isn’t effective against the debtor or third parties unless the debtor accepts it or is formally notified, with that acceptance bearing a certified date.

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