Circular dated February 15, 2021 amending controls and rules of bank financing for real estate development companies

Cairo: February 15, 2021

Dear Mr./Chairman of the Board

Bank

Greetings,

With reference to the Circular Letter issued on October 2, 2007 regarding the controls and rules of bank financing for real estate development companies operating in the field of creating residential units for sale, and subsequent circular letters.

And within the framework of monitoring the financial needs of various economic sectors and working to provide them, especially those sectors that contribute to the development plans adopted by the state, including the real estate development sector, which is linked to many other industries.

The Board of Directors of the Central Bank decided in its meeting held on February 7, 2021 to amend the aforementioned decision, as follows:

First: Regarding Article One of the Decision, the following shall apply:

(1) Amendment of Item No. (1) to read as follows: "That the land on which the residential units are built is owned by the borrowing company or has been allocated by a decision from its owner, with the possibility of granting financing for real estate projects based on participation between real estate development companies and government entities and/or private companies, provided that creditworthiness, good reputation, and high financial adequacy are verified for all parties."

(2) Reaffirmation of what was stated in Item No. (3), with the necessity for the bank to oblige the company to submit a detailed schedule for completing construction works for each stage of the project, and the actual completion volume will be reviewed against the schedule by the competent consulting authority to ensure the company's seriousness in completing the project and that the provided financing is not for speculation in real estate or avoiding it to benefit from price differences.

Second: Amendment of Article Three of the Decision to read as follows:

• The bank shall open a special account for the project service, into which all proceeds from the sale of residential units (down payments, installments, late fees, commissions, compensation for additional works, and the company's own funds designated for the project, etc.) shall be deposited. Also, another current debit account shall be opened through which the financing provided by the bank is disbursed. The balance of these accounts shall not be used except for spending on the project or repaying the debt of the current debit account, in proportion to what has been implemented of the project as approved by the consulting authority mentioned in Article One, Item (3) of the same decision.

Third: Addition of a new item including the possibility of allowing banks to finance land installments due from their clients who have existing credit facilities from real estate development companies operating in the field of creating residential units for sale,**

Subject to the following conditions:

1. The financing shall be granted within the existing facility for the real estate development company, only in case the company faces a liquidity shortage preventing it from paying the installments due to the land owner from its own resources, with the bank conducting the necessary credit study to verify this.

2. The land owner must be one of the governmental bodies or entities.

3. The bank shall study the cash flows of the project after including the value of the additional deficit to be financed, to determine the feasibility of the project and the client's ability to meet its obligations to all concerned parties.

4. The real estate development company must have already received advance payments from its clients and started construction works.

5. Reaffirmation that the financing granted to real estate development companies to finance land installments will be added to the total value of amounts granted by banks to real estate development companies when calculating the maximum limit mentioned in Item No. 12 of the Circular Letter issued on April 7, 2019 regarding the controls for discounting commercial papers for real estate development companies without recourse.

Fourth: Reaffirmation of compliance with the remaining conditions contained in the decision of the Board of Directors of the Central Bank of Egypt in its meeting held on October 2, 2007 regarding the controls and rules of bank financing for real estate development companies operating in the field of creating residential units for sale.

Please be so kind as to direct compliance with the mentioned decision.

Accept our highest regards,

Tarek Amer