Buying Property in Egypt

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Buying property in Egypt - Guide to buying off plan and investment property in Egypt

Pyramids, pharaohs, deserts, year round sunshine, great scuba diving and low property prices! These are just a few of the things that spring to mind when Egypt is mentioned. Boasting over five thousand years of history and culture to explore, improved travel links and a change in real estate law have brought Egypt to the forefront of property investment for those seeking emerging markets in which to invest at very low prices even when compared to Eastern Europe.

Egyptian property is in its infancy by any standard, but there are some very interesting pointers that property investment in Egypt could be a wise option. Egypt has an established tourism industry that blossomed years ago through cruises of the Nile and package tours, but now it is evident that the short term rental market is thriving and in the process delivering early investors some excellent returns.
For international investors looking to invest in an emerging property market that offers a relative low risk, Egypt is well worth considering

Tourism

Although Egypt already possessed an established tourism industry, it was flagging, but with the international investment and external interest, the Egyptian government began to promote the country as a unique holiday destination and one that offered a viable option to the Mediterranean thanks to its stunning coastlines along the Red Sea.

Egypt is already one of the most popular high-end destinations for European tourists, in the Medium haul travel sector and with improving infrastructure, new foreign investment legislation and low property prices, property in Egypt is sure to increase in value very quickly, making now an excellent time to invest in Egypt.

Rental Returns

Short term rental returns have recently been excellent and with more changes on the planning board for the near future, longer term real estate options could soon be available. New legislation will no doubt make it far easier for foreign investors to purchase freehold properties in Egypt.

International Property Investment in Egypt 

Up until 2005 the Egyptian government could impound and / or nationalize any property in Egypt at any time, but changes to legislation has now barred this and now foreigners are free to purchase freehold real estate throughout Egypt with the exception of the Sinai Peninsula where maximum leaseholds of 99 years are available. These reforms are increasing the confidence in the Egyptian real estate market as the realisation unfolds that the government in Egypt is finally opening its arms to international investors and is willing to promote tourism as a principle industry.

Off Plan Property Developments

The majority of international investors are concentrating on off plan property investments in Egypt due to the fact that although freehold properties can be purchased by foreigners, there can be problems with resale properties. The previous Land Registry was archaic, with charges of 12% being applicable for home owners to register their properties. Because of this an estimated 10% of all properties in Egypt are legally registered with current title deeds.

New off plan developments are far more attractive to international investors as the land that is currently being used to build new off plan projects on was purchased directly from the government, hence free of liens and charges and most importantly with clear titles.

Buying Property in Egypt: Due Diligence

There are a growing number of new off plan developments in Egypt from which to choose, all with licenses, infrastructure and guarantees in place. However you need to be aware that all legal documents integral to the purchase of property in Egypt is in Arabic and this means that you should immediately retain a lawyer that not only speaks your language but one that ideally has a good understanding of British and / or International property law. Egypt has double taxation treaties with a number of countries including Britain and an accountant should also be contacted.
Your lawyer will perform searches on the developer of the off plan development in which you are interested to ensure that all of the necessary paperwork and contracts are valid and legal - even established developers can make important errors when preparing paperwork.

Once you have decided on an off plan property to purchase, you will be asked to pay a reservation / holding deposit which will enable the developer to remove the property from the market and begin the preparation of sales contracts - this is typically between £2,000 - £5,000 depending on the value of the property. During this time your lawyer should be performing his own searches to determine whether the property is being offered with all of the relevant paperwork in order.

Legal Advice 

Some developers in Egypt ask for stage payments which will be paid at specific stages throughout the construction period. Your lawyer needs to inspect these payment terms! Where possible you should try and retain a lawyer that is local to the area of your purchase as local laws, holidays etc could unnecessarily slow down the purchase process

All of the legal paperwork involved in your property purchase in Egypt is written in Arabic. Many bi-lingual lawyers will be more than happy to supply you with translations in your own language. Read these carefully and even ask your own lawyer in your own country to double check them for you - they will be able to translate the legal jargon for you even though some of the processes may be different or alien to what they are accustomed to.

The Registration Process

Egypt has a fairly complex registration system when it comes to real estate and it is essential that your lawyer is instructed to perform the searches and also to handle the sale on your behalf. Preparing a power of attorney could also be an option for overseas buyers who will not be present at the closing of the sale and any other intermediate signings that may be necessary.

Once you have paid your holding deposit, the developer of your off plan property will make available a private purchase contract, any paperwork that is related to the property purchase such as the title deeds, planning permissions, building licenses and the details of any stage payments that will need to be adhered to. Other services such as guaranteed rental terms, furnishing package options, upgrades and community information should also be put forward by the developer at this point.

Stage Payments

Stage payments should be transferred to an ESCROW account, where it will be held until the property developer fulfils his obligations. Once these KEY stages have been signed off, the funds will be released from the escrow account. Upon completion of the development, your property will be registered in your name with the Egyptian Land Registry. Please note that individual title deeds are only delivered when the entire off plan development has been completed and signed off. This process can take up to four month.

Fees and Taxes

Legal fees and registration duties will cost you in the region of 9% which includes the conveyancing and stamp duties. There is a further charge of around £50 which is for the inspection and measurement of the property.

Registration

Overseas property owners in Egypt now only have to pay 3% to register their property and because the majority of foreign investment is in cities and resort areas the title the procedure is fairly straightforward and reliable.

Renting out your property in Egypt.

Property prices in Egypt especially on the Red Sea are currently very low and offer some great investment opportunities for foreign investors that wish to buy property in low risk areas.  

If you generate over 5,000 LE (Egyptian pounds) in rental each year you will be liable to lay between 20-22% in income tax on your rental revenue.
2.5% must be paid from any sale of real estate - this must be filed by April 1st of the applicable tax year.

There are NO Inheritance Taxes or Capital Gains Taxes in Egypt.