The Financial Regulatory Authority (FRA), 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.
The amendments take into account the specific nature of real estate companies’ activities, operating cycles, and contractual obligations towards customers, which are settled through project completion and delivery.
Under the decision, the second equity requirement for companies seeking to convert into real estate investment fund companies has been amended. 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.
Net equity will be calculated after excluding any differences resulting from asset revaluations. Following the conversion, the remaining net equity will be used to subscribe to the fund’s investment certificates, based on the financial statements approved by the fund company’s general assembly.
The decision also introduces an additional requirement stipulating that the value of loans recorded in the company’s latest approved financial statements must not exceed the maximum borrowing ratio permitted for real estate investment funds under the executive regulations of the Capital Market Law.
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.
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.
He explained that experience had shown that calculating a company’s net equity as a proportion of its total assets and investments was not appropriate for the particular nature and operating model of the real estate development business.
A significant portion of these companies’ liabilities relates to obligations to complete and deliver projects against advance payments collected from customers. These are operating liabilities that must be disclosed in the fund’s information memorandum when investors are invited to subscribe to its certificates or when the fund is listed on the stock exchange.
Azzam said the new decision strikes a balance between taking into account the nature of real estate development companies and facilitating their conversion into investment funds, while ensuring compliance with the borrowing requirements set out in the executive regulations of the Capital Market Law.
Under Article 160 of the 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.
