Egypt Imposes Restrictions on Foreign Ownership of Real Estate Brokerage Companies
On 13 October 2019, the Minister of Trade and Industry issued Decree No. 827 of 2019 amending the Executive Regulations of the Commercial Agency and Brokerage Law No. 120 for 1982 (“Agency Law”). The amendment expanded the definition of the ‘commercial broker’ to include real estate brokers who arrange for or negotiate real estate sale and purchase transactions, even if for a single time.
According to the Agency Law, it is mandatory for any person or entity which is carrying out agency or brokerage works to be registered in the Agents and Brokers Registry at the General Authority for Export and Import Control (GOEIC). Failure to comply with this registration requirement exposes the broker or the management of the brokerage firm to penalties ranging from imprisonment for a period of not less than 6 months or fines ranging between EGP 500 and EGP 10,000 or both imprisonment and fines.
Pursuant to Article 3 of the Agency Law, only Egyptian nationals can be registered as brokers. Also, legal entities may not be registered unless they are fully owned by Egyptian nationals, or to otherwise be owned by Egyptian entities with majority shareholders of Egyptian nationality.
As a result, the amendment of the Executive Regulations of the Agency Law entails the following consequences:
- Existing real estate brokers and brokerage companies are now required to register in the Brokers Registry at GOEIC; otherwise they will be exposed to the abovementioned penalties ascertained under the Commercial Agency Law.
- Foreign owned real estate brokerage companies are no longer allowed to carrying out their work in Egypt since they will not be able to register at GOEIC. This is unless such companies amend their ownership structure to meet the legal requirement relating to the national ownership.
We believe this amendment comes on a bizarre timing as Egypt is adopting an ambitious urban expansion plan. Egypt is also witnessing a number of huge construction projects in different areas of the country.
We believe that the Egyptian real estate market is able to accommodate more marketing and brokerage companies especially when foreign investors, particularly in the GCC, are becoming the target of many real estate developers.
No doubts that allowing international real estate brokerage companies to work in Egypt has many benefits. It will enhance competition and leads to improving the quality of services provided as well as the introduction of more innovative solutions. International companies also play an important role in transferring their experience to the Egyptian market as they rely mainly on Egyptian employees.
It is noted that a number of legislation was issued in Egypt during the last couple of years restricting foreign ownership of investments in several sectors. For example, Law No. 86 for 2015 was issued to prohibit foreign ownership of security services companies. Also, the Ministerial Decrees No. 183 and 184 of 2019 were recently issued to restrict foreign ownership of companies owning private schools in Egypt to 20%. These kinds of regulations are not in line with the Government’s announced policy of attracting more foreign investments and create new job opportunities in Egypt.