Real Estate Investment Trusts (REITs)) in Egypt

A Reading of the Legal and Regulatory Framework in Light of the Latest Decisions of the Financial Regulatory Authority

Introduction

The regulation of Real Estate Investment Trusts (REITs) in Egypt has witnessed notable development in recent years, within the framework of the Financial Regulatory Authority’s direction toward developing the capital market, diversifying investment instruments, and providing innovative financing mechanisms for various economic sectors, foremost among them the real estate sector.

Real estate investment trusts represent one of the investment models that combine investment in real estate assets through regulated and supervised financial instruments, allowing investors to share in the returns of the real estate sector without the need to own real estate directly or bear the burdens associated with its management and operation.

These trusts also provide an effective means of converting real estate assets into income-generating investment portfolios, thereby enhancing the efficient use of assets and supporting the diversification of financing sources.

The Financial Regulatory Authority has worked to progressively develop the regulatory framework for this activity, beginning with the provisions set out in Capital Market Law No. 95 of 1992 and its Executive Regulations, followed by the decisions regulating investment policy, asset valuation, and subscription in exchange for in-kind shares, up to the latest regulatory developments witnessed in 2025, through the regulation of digital investment in real estate investment trust documents and the establishment of a framework for the conversion of real estate investment and development companies into real estate investment trust companies.

This article reviews the legal and regulatory framework for real estate investment trusts in Egypt, focusing on the most notable developments introduced by the Financial Regulatory Authority and their practical impact on real estate companies, investment managers, and investors.

First: The Nature of Real Estate Investment Trusts (REITs)

The Executive Regulations of the Capital Market Law defined the real estate investment trust as a closed-end investment trust established in the form of a joint-stock company, which issues documents in exchange for the trust’s investments in real estate assets, including land, constructed real estate, and other assets that ensure a certain degree of liquidity, and whose purpose is to invest the trusts of document holders in investment in real estate assets or rights associated therewith, with the aim of achieving a periodic investment return or an increase in the value of the assets, in accordance with the approved investment policy and the controls set by the Financial Regulatory Authority.

This definition reflects the special nature of real estate investment trusts as an investment instrument that differs from traditional real estate development companies.

While real estate development companies focus on constructing real estate projects and selling units to achieve profits, real estate investment trusts aim to own and manage portfolios of real estate assets or rights associated therewith, with the aim of achieving sustainable cash flows and increasing the value of the assets over the long term.

This model is also characterized by the separation between ownership of trusts and their management, whereby an investment manager licensed by the Financial Regulatory Authority undertakes the management of the trust’s assets in accordance with the approved investment policy, while the custodian undertakes the safekeeping of the trust’s assets and monitors compliance with regulatory controls, thereby enhancing principles of governance and protecting the rights of document holders.

Second: The Legal and Regulatory Framework for Real Estate Investment Trusts in Egypt

The regulation of real estate investment trusts in Egypt is based on an integrated legislative system, foremost among which is Capital Market Law No. 95 of 1992 and its Executive Regulations, which included special provisions regarding real estate investment trusts in terms of their legal nature, incorporation procedures, rules for managing their funds, the entities overseeing them, and disclosure and supervision controls.

The trust company is also subject to the provisions of Companies Law No. 159 of 1981 with regard to its incorporation, the management of its affairs, and the convening of its general assemblies, to the extent that this does not conflict with the special provisions set out in the Capital Market Law and its Executive Regulations.

In completion of this framework, the Financial Regulatory Authority issued a number of regulatory decisions addressing the technical aspects of the activity, most notably Decision No. 34 of 2014 regarding the investment controls for real estate investment trusts, Decision No. 129 of 2014 regarding subscription in trust documents in exchange for in-kind shares, and Decision No. 130 of 2014 regarding the rules for valuing the net assets of trusts.

These decisions represented fundmantel stages in building the regulatory framework, as the Authority did not limit itself to setting general rules, but rather worked to address the practical aspects related to the formation of real estate portfolios, asset valuation, and ensuring the existence of oversight mechanisms that protect investors and enhance transparency.

Third: Key Controls Governing the Activity of Real Estate Investment Trusts

The Financial Regulatory Authority has been keen to establish investment controls that achieve a balance between granting investment managers the necessary flexibility to manage real estate portfolios and protecting the interests of investors.

In this framework, Decision No. 34 of 2014 established a framework for the investment policy of trusts, such that investments are focused primarily on real estate assets capable of generating returns, whether through leasing, operation, or any other form of economic exploitation of the real estate asset. The Decision also permitted investment in a diverse range of real estate assets, including land and residential, commercial, tourism, industrial, and service real estate, in addition to certain financial instruments related to real estate activity, allowing for diversification of the trust’s portfolio and achieving a balance between return and liquidity.

The legislator also regulated the controls governing the borrowing of real estate investment trusts, permitting real estate investment trusts to borrow within a limit not exceeding 100% of the paid-up value of the investment certificates or the book value of the trust, whichever is lower, in accordance with the limits and controls set forth in the trust’s prospectus or information memorandum. This differs from the rule applicable to open-ended investment trusts and money market funds, whose borrowing is limited to meeting redemption requests and subject to specific conditions, including that the term of the loan shall not exceed twelve months and that the amount of the loan shall not exceed 10% of the value of the outstanding investment certificates at the time the loan application is submitted.

One of the most important elements of regulatory protection is also the requirement that real estate assets be valued by valuation experts registered with the Financial Regulatory Authority, ensuring an independent and objective basis for determining the value of assets, particularly given the special nature of the real estate market and the dependence of asset value on multiple economic and operational factors.

Disclosure and governance requirements also play a key role in regulating the activity, as the trust and the investment manager are obligated to provide the necessary information to investors, enabling them to evaluate the trust’s performance and make their investment decisions on a clear basis.

Fourth: Key Regulatory Developments for the Year 2025

• Regulation of Digital Investment in Real Estate Investment Trust Documents

Decision No. 125 of 2025 regarding the controls for establishing digital platforms for investment in real estate investment trust documents represents one of the most notable recent developments in this field, as it allowed subscription promotion and underwriting companies licensed by the Financial Regulatory Authority to establish and operate electronic platforms enabling investment in real estate investment trust documents. This decision reflects the Financial Regulatory Authority’s direction toward leveraging financial technology to expand the investor base and facilitate access to regulated investment products.

The decision also imposed a set of obligations on digital platforms, including making available the basic information related to the trust, publishing financial statements and information memoranda, and periodic disclosure of the document’s value and any material developments related to the projects under investment.

The importance of this decision is not limited to the technical aspect, but extends to enhancing levels of transparency and providing a more accessible investment channel for investors, thereby supporting the growth of the real estate investment trust market in Egypt.

• Conversion of Real Estate Investment and Development Companies into Real Estate Investment Trust Companies

Decision No. 179 of 2025 introduced a regulatory framework allowing companies engaged in real estate investment or real estate development activity to convert into real estate investment trust companies in accordance with specific conditions and controls.

This decision reflects an important direction toward restructuring existing real estate assets and converting them into organized investment portfolios subject to the supervision of the Financial Regulatory Authority. It also allows real estate companies to benefit from the real estate investment trust model as a more efficient means of managing assets, attracting financing, and benefiting from a broader base of investors.

The decision also sets out a number of requirements to ensure the seriousness of the conversion, including meeting specific financial requirements, ensuring the company’s assets conform to the controls established for real estate investment trusts, and submitting the necessary studies and reports relating to the legal, financial, and tax aspects of the conversion.

Fifth: The Tax Treatment of Real Estate Investment Trusts under Law No. 30 of 2023

Law No. 30 of 2023 regulated the tax treatment of real estate investment trusts established in accordance with the provisions of the Capital Market Law by specifying the revenues that benefit from the tax treatment prescribed under item (18) of Article (50) of the Income Tax Law. These include the trust’s profits within the scope of its licensed purpose, real estate income, dividend distributions, capital gains, as well as the returns realized on the fund’s bank deposits, provided that the legally prescribed controls are satisfied.

To benefit from this treatment, the trust is required to invest its funds in the shares of companies or real estate trusts or in constructed real estate at a rate of not less than 80% of the average of its total annual investments, and 80% of the trust’s revenues must consist of revenues derived from consideration for leasing real estate assets, or dividend distributions and share profits in real estate companies, or capital gains resulting from the sale of fixed assets or shares in real estate companies, or the profits, returns, and distributions resulting from the trust’s investments in other real estate trusts. It is also required that the trust does not engage in real estate development or contracting activities, without prejudice to the provisions of Article (58) of the Income Tax Law.

The law also provides for the exclusion of the amounts received by the holders of the trust’s certificates who are resident natural or juridical persons from the tax base subject to tax for such persons, after deducting the costs associated therewith. Benefiting from any tax exemption under the provisions of the law does not result in the carryforward of losses to subsequent years.

On the other hand, the first paragraph of Article (46 bis/2) specifies the tax rate applicable to the profits, returns, and distributions received by the holders of certificates of real estate investment trusts established in accordance with the Capital Market Law, at 5% for natural persons and 15% for juridical persons.

Sixth: Practical Impact and Future Directions

The recent regulatory developments reflect a clear direction on the part of the Financial Regulatory Authority toward moving real estate investment trusts from a mere traditional regulatory framework to a more developed and flexible investment system.

On one hand, the regulation of digital platforms allows larger segments of investors to access real estate investment through regulated financial instruments, while the organized conversion framework provides real estate companies with an opportunity to restructure their assets and benefit from an investment model based on the institutional management of real estate portfolios.

On the other hand, these developments confirm the importance of the Financial Regulatory Authority’s supervisory role in achieving a balance between developing investment products and encouraging innovation on one hand, and ensuring governance, transparency, and investor protection on the other.

With the continued development of the legislative and regulatory environment, real estate investment trusts are expected to represent one of the important tools for enhancing institutional investment in the Egyptian real estate sector, providing new financing channels, and supporting the deepening of the capital market.

Conclusion

The development of the regulation of real estate investment trusts in Egypt represents a clear model of the Financial Regulatory Authority’s approach to developing non-banking financial activities through a gradual regulatory framework that responds to market needs and enhances investor protection.

Through developing investment controls, regulating valuation and management mechanisms, introducing digital investment, and establishing a framework for the conversion of real estate companies into real estate investment trusts, the Financial Regulatory Authority seeks to build a more efficient and transparent market, thereby enhancing the position of real estate investment trust as an important investment and financing instrument within the Egyptian market.