The government is putting the final touches on a draft law to regulate real estate development that could fundamentally dismantle the industry’s reliance on pre-sales to fund construction, two informed sources tell EnterpriseAM. The legislation — drafted in coordination with the Real Estate Developers Division and slated for a parliamentary debut next month — will introduce developer tiering and a 30% construction threshold before sales can begin.

Why it matters: While the initiative is part of a move to institutionalize a fragmented market and prioritize market stability, not everyone will be impacted equally. Although larger players may be able to adjust to the proposed changes, it threatens to squeeze out small-to-mid-sized players who lack sizable balance sheets to build before they sell or be overlooked in land allocations.

30% completion rule, tiering developers pose challenges to the sector — especially smaller players

Under the draft law, developers cannot market, sell, or collect a piastre from buyers until they have completed 30% of construction and secured all ministerial approvals, we were told.

Egypt’s real estate market has been built on this interest-free loan model as developers have used buyer down-payments and installments to fund the actual construction. By mandating 30% completion before the first sale, the government would be effectively cutting off this cheap liquidity, which means that for a project with a EGP 1 bn construction cost, a developer now needs EGP 300 mn upfront just to earn the right to sell.

This provision remains contentious, as developers have rejected the requirement, citing high financing costs and liquidity constraints that could slow project execution. Developers argue that buyers who purchase before construction begins are effectively partners and benefit from preferential pricing. But nothing is yet set in stone, as discussions are still ongoing to strike a balance between protecting buyers and avoiding harm to investors, one source told us.

This could pose a serious challenge for smaller developers, as while large developers with deep pockets and access to bank financing may be able to navigate the financial barrier, small- and mid-size players that rely on pre-sales to break ground will have a much harder time.

Complicating things further for smaller players, is the proposal to classify developers according to their financial capacity to execute a project in government land allocations, with the aim of making sure that developers can complete a project, do it on time, and not end up leaving customers out of pocket, our sources told us. Under the draft law, you won’t be able to get the land if you don’t have the balance sheet, reducing the pool of potential projects for smaller players.

The draft law is also said to contain a mandatory requirement to opening of a dedicated, project-specific bank account for every development. While this is intended to ensure customer investments are protected and delivered according to contractual timelines, this full financial separation between projects will undoubtedly cause a headache for developers — and again much more so for smaller developers.

Developers would no longer be able to use funds from a successful project in one part of the country to plug a funding hole in another, preventing developers from moving capital across its projects to where it’s most needed.

Also proposed is a new standardized legal contract to protect the rights of both developers is also being developed by the Real Estate Development Chamber, which will be binding to prevent legal disputes and sale and purchase agreements. The contract will put on paper and clearly define the contractual terms, tax and procedural obligations for both parties, and regulations for real estate exports.

Protection from project delays will also be caked into the contracts, with legal provisions put in regarding timelines and a dispute framework to protect buyers.

The state is also moving to institutionalize property management through a separate legislative package aimed at building maintenance and longevity. Beyond just new builds, the government is looking to mandate that maintenance fees for residential compounds be held in independent, project-specific accounts

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