Off Plan Property

The process in Egypt is quite simple. To take the property of the market an initial reservation fee will have to be paid by the purchaser. Following to this payment, the buyer will have to transfer the deposit minus the reservation fee. These amounts always depend on the development. Upon payment of this deposit, a Private Purchase Contract (PPC) will be signed between the purchaser and the developer, which will detail the terms and conditions of the sale. Some contracts being more than incomplete, it is essential to make sure that the following clauses are inserted in the PPC:

  • recognition that the property is freehold
  • insertion of the different installment
  • insertion of a penalty clause in case of late delivery and also of a cancellation clause, allowing the purchaser to withdraw from the deal and to recover all the money paid so far, in case the delay would be superior to a certain time (usually a year from the expected date of delivery)1
  • last but not least insertion of the clause in relation with the pre-emption right: The pre-emption right is a legal institution settled by the Iyàs (caliph consultants) in Egypt between nineteenth and twentieth centuries. This means the right to buy an adjoining property by virtue of the fact that the neighbor has priority, over any third party, to ownership of that property. Nowadays it is a common practice to have this clause in the PPC, this will have for consequence that both the vendor and the seller will waive that right and will avoid consequently any conflict in the future with neighbors.

Following the signature of the PPC, the purchaser will have to transfer (usually within 30 days from the signature of the contract) the first installment. Upon reception of the funds the developer will countersign the contract and return a copy to the purchaser.

Key Ready Property

In this case the deposit is usually more important between 10% and 30 % of the price of the property. The sale contract will need to stipulate the delay that the purchaser benefit to transfer the balance of the price. Should there be any works to be carried out in the property some installment can be inserted in the contract to make sure that the funds are released based on the progress of the works. The entire purchase process can be done without the purchaser being on the ground, even though we will always advise them to be there in order to have a look at the property and meet the different parties involved. For the clients using our services and do not willing to come over, we will send an authorisation to debit his card of the amount of the initial deposit, to allow us to charge this amount and provide the developer/vendor with a proof that the deposit has been paid. Meanwhile, we will send the contract filled both in Arabic and English (or any other languages) to the client with all the relevant instructions for him to sign it and return it to us. Along with the contract we will provide him with the breakdown of funds that will need to be paid.

B. Taxes Related to the Purchase

The buying cost will be paid upon registration of the property. Since the beginning of 2008, the registration tax in Egypt amount to a maximum of 360 Euros per Unit. (3.000 Egyptian pound LE).

C. Legal Fees

We would send you upon request a specific quotation based on your needs and the specificity of your case.

Total Costs When Buying a Property

Apart from the registration fees, which are maximum 3.000 LE (around 360 Euros per Unit), which are compulsory and the fees for the lawyers and power of attorney there are not other costs.

D. Taxes Related to the Sale

There is no capital gain tax in Egypt. However, upon resale there is a transfer tax with a flat rate of 2.5 % payable by the vendor. The purchaser of a property in Egypt will remain liable to declare the profit he made from the resale of his property to the tax administration of his country of residence. There was a project of Law to be enforceable in 2009 to increase the transfer tax at 10 %. Until now nothing had been adopted and according to most of the specialists of the sector this will probably not be effective before next year.

Income Tax on Furnished Property

These are the official tax brackets:

Rental income Tax
From 0 to 5.000 LE * 0%
From 5.000 LE to 20.000 LE * 10%
From 20.000 LE to 40.000 LE * 15%
More than 40.000 LE * 20%

* Being this the Exchange rate as from today (12th of July 2014): 5.000 LE ——- 513,9 Euros 20.000 LE ——- 2.055,5 Euros 40.000 LE ——- 4.111,0 Euros The taxable income might be up to 50 % of the gross rent, since the Egyptian tax administration will allow the owner of the property to deduct from the tax amount some costs involved by holding the property (Management and community fees – Works and modifications carried out in the property. Since mortgage for foreigner is just a new procedure we are unsure whether it will be possible or not to deduct the interest of mortgage granted in Egypt, even tough it is more than likely). The amount minus the deduction will then be taxed based on the progressive rate here above and both amounts will be added to get the total amount to be paid.

Income Tax on Unfurnished Property

No income will be due on unfurnished property if the owner is not tax resident in Egypt.

E. Repratiation of Funds

There are no restrictions in Egypt for this matter as long as the taxes are duly paid to the tax administration. Any money brought back to their country of residence by the owner/seller of a property in Egypt will be subject to the relevant law applicable in this country.

F. Bank Guarantees

There is no bank guarantee in Egypt. Consequently, it is more than advisable to deal only with the most reputable and strong developer to avoid any possible bankruptcy. In such situation, the purchaser would have to sue the insurance of the developer if there is any or the shareholder and manager in person to recover their money, without any guarantee of success.

G. Structure Guarantee

There is a five year structure guarantee.

H. Bank Accounts

Opening a personal bank account in Egypt is very straight forward. There are many branches of international banks., such as HSBC, Barclays, Société Générale, BNP Paribas, CIB… The process of opening an account will take no more than half an hour. Accounts are available in Euros, Dollars and British Pounds. The opening of a professional account is not much more complicated and can be done meanwhile the company is being registered.

I. Other

  1. Due to an insufficient legal regulation in Egypt in real estate, any time developers are willing to acquire land from the government, the terms and conditions of the sale will have to be agreed through the purchase contract signed with the Egyptian Resort Company S.A.E (hereafter referred as ERC) which is a Joint stock company acting under private law as the legal tool of the government to sell and control real estate development.Consequently the conditions granted to developers will not be the same depending who they are, how big they are and especially whether or not they bought the land cash or by means of a loan. In this case the control of the administration over the program will be much more strict than for the one that bough the land cash.
  2. his is a common practice in Egypt for developer to register the land on completion of 70% or 80% of the project. Therefore the fact that no registration has been made upon the beginning of program is not a problem but again, all the best care will need to be taken to deal with the most reputable developer to avoid any possible legal action in the future.
  3. There is no interest for foreigner to buy trough a local company. For clients willing to buy trough their own company at home, some registration and recognition procedure will be required.
  4. Egypt has been classified in 2008 by the World Bank Organisation as the n° 1 country for the improvement of their national Law in order to facilitate business, with 5 main improvement such as: cutting from 50 000 Egyptian pound to 1 000 Egyptian pound the minimum capital required to start business, reducing the registration fee from 3% of the value to a fix amount (see above B) Buying costs), making easy and shorter the approval of building permits and other real estate licences2.

1 These clauses are almost never mentioned upfront in the developer’s contract, as a consequence this is always something that we are requiring from them, at least for the first one. We strongly believe that any program without this security in the contract should not be sold. 2 Doing Business 2008 – Comparing regulations in 178 economies (Doing business Project world bank Group). www.doingbusiness.org