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Conditions Regulating the Sale of Units in Real Estate Development Projects

Ministerial Resolution No. 2184 of 2022

A real estate developer (“developer”) is a legal entity that’s authorized by the competent Ministry to engage in real estate development activities, provided that this activity is licensed in its commercial register, articles of association, official amendments, etc., Such developments must be processed within a specific period determined by the developer, on the condition they do not exceed the technical and financial requirements specified by the competent Ministry.

In recent years, the real estate sector has lacked concrete regulatory rules which control the authority of the developer upon selling the units within its projects or delivering them at a specific time. This in turn created a contractual relationship heavily in favor of the developer, without taking into account the rights and interests of customers, which has led to a reduction in the overall size of the real estate sector.

With the above in mind, the state was keen to develop the real estate sector to balance the relationship between the developer and the customer; Hence, Ministerial Resolution No. 2184 of 2022 was issued to implement conditions for the sale of a unit within real estate development projects, obligating the developer to deposit a specific amount of money proportionate to the size of the project in a specific bank account.

The aforementioned deposit has been determined as follows: 30% for the limited area, 25% for the small area, 20% for the medium area, 15% for the large area, and 10% for the maximum area.

The resolution has also authorized the developer to sell provided that the general plan is approved by the competent authority, and the developer submits to the latter proof of financial capability to cover the cost of the phase of the project being sold by submitting a semi-annual financial report approved by the company’s auditor, with adhered to the schedule approved by the competent authority.

The developer was also given a period of 12 months to deliver the unit starting from the delivery date specified in the contract. In the event that the delay exceeds the aforementioned period, the installments due shall be carried forward until the delivery within the same period after the expiry of the remaining installments.

In the event that the delay period exceeds 24 months, the customer has the right to continue to carry the installments until receipt of the unit, or the recovery of the amount paid within a maximum period of 3 months from the initial request of recovery.

The developer’s violation of any of these controls and obligations shall result in the entire phase being suspended by the competent authority unless he corrects his wrongdoing within 6 months.

Developers are also obligated to manage the implemented projects to preserve the assets of the purchaser by making payments from the collected maintenance deposit returns of the latter.

To conclude, this article aims to highlight the state’s endeavor to establish a balanced real estate sector that limits compliance contracts, guarantees the rights of customers, and regulates the contractual relationship between developers and buyers to restore confidence in these transactions and generally improve the real estate sector.

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Written By

Maher Iskander - Managing Partner / Noor Mahdy - Attorney at Law

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