If you’ve ever considered buying real estate in Egypt, you may have wondered about the process and the associated costs. Well, look no further! This article serves as a guide to purchasing real estate in Egypt as a foreigner. It covers important information such as the limitations on property ownership for foreigners, the approval process, and the requirements for registering property. With this overview, you’ll have a better understanding of what to expect when navigating the Egyptian real estate market. So, let’s dive in and explore the ins and outs of buying real estate in Egypt!
Guide to Buying Real Estate in Egypt
How to purchase real estate in Egypt as a foreigner?
If you are a foreigner looking to purchase real estate in Egypt, it is important to familiarize yourself with the process involved. Under Law No 230 of 1996, foreigners are allowed to buy property in Egypt. However, there are restrictions in place. Foreigners cannot buy more than two pieces of real estate, and the total area of the properties cannot exceed 4,000 square meters. Additionally, the purpose of the purchase must be for a family member to live in the property. It is important to note that approval from the Council of Ministers is required for the purchase, and this can take around two months to obtain. To simplify the process, it is recommended to seek the assistance of legal advisors who specialize in real estate transactions in Egypt.
How high are realtors’ and lawyers’ fees in Egypt?
When purchasing real estate in Egypt, you will incur costs associated with realtors’ and lawyers’ fees. These fees can vary, but on average, realtors’ fees range from 2.75% to 3.30% of the property’s value, and lawyers’ fees are around 3% of the property value. It is worth noting that these fees are typically paid by the buyer.
What about other property purchase costs?
In addition to realtors’ and lawyers’ fees, there are other costs to consider when purchasing real estate in Egypt. These include a registration fee, transfer tax, and capital gains tax. The registration fee is capped at EGP2,000 (US$345) regardless of the purchase price of the property. The transfer tax is 2.50% and is paid by the seller. The capital gains tax is imposed on the sale of land and buildings within the boundaries of an Egyptian city at a rate of 2.5% of the gross gains of the seller. It is important to factor in these additional costs when budgeting for your real estate purchase in Egypt.
Registering property in Egypt
After purchasing a property in Egypt, it is necessary to register it. Once registered, the property cannot be sold or rented for a period of five years. It is important to note that the purchase sum must be brought into Egypt in foreign exchange through one of the public commercial banks, although this provision of the law is not consistently enforced. Another requirement is that the property must be rented furnished after the initial five-year period, which has tax disadvantages. To ensure a smooth registration process, it is advisable to consult with legal experts familiar with the local regulations.
IF THE FOREIGNER IS MARRIED TO A LOCAL
If a foreigner is married to a local, it presents an alternative solution for purchasing property in Egypt. In such cases, the spouse who is a local can buy the property, allowing the couple to avoid certain taxes and complications associated with foreign ownership. This approach is commonly adopted by locals in Egypt when acquiring real estate.
´SIGNATURE VALIDITY COURT VERDICT´
In the specific case of purchasing property in Sharm El Sheikh, there is a different set of rules and regulations. An administrative decree issued in 2005 revoked the 1996 law for property in Sharm El Sheikh. As a result, foreign purchasers in Sharm El Sheikh cannot acquire freehold rights and can only obtain 99-year leases. To buy property in Sharm El Sheikh, a procedure called a “signature validity court verdict” must be followed, along with other necessary steps. It is recommended to seek the guidance of legal experts who specialize in the Sharm El Sheikh property market.
OWNERSHIP
When it comes to ownership of property in Egypt, there are two main routes: registration and the “signature validity court verdict” method. Each approach has its own advantages and disadvantages. Registration offers full and maximum protection, as it is the recognized method in Egyptian law for transferring real estate ownership. However, there are restrictions on selling the property within a five-year period, and even after that, written approval from the Prime Minister is required. On the other hand, the “signature validity court verdict” method provides practicality for real estate transactions, allowing flexibility in buying, renting, and selling properties. However, it offers weaker protection compared to registration. Consulting with a real estate lawyer can help determine the best ownership route based on individual circumstances.
WHICH OWNERSHIP ROUTE IS BEST?
Choosing the best ownership route depends on various factors, including personal preferences, future plans, and legal considerations. It is advisable to consult with legal experts who specialize in real estate law in Egypt to make an informed decision.
COSTS WHEN PURCHASING REAL ESTATE IN EGYPT
Purchasing real estate in Egypt incurs various costs, including registration fees, legal fees, real estate agent fees, transfer tax, and capital gains tax. The buyer is responsible for paying the registration fee, which is capped at EGP2,000 (US$345). Legal fees, which are approximately 3% of the property value, are also borne by the buyer. Realtor fees, ranging from 2.75% to 3.30% of the property value, are typically paid by the seller. The seller is also responsible for paying the transfer tax, set at 2.50%. Capital gains tax, which is 0%, is imposed on the seller. It is important to consider these costs when budgeting for a real estate purchase in Egypt.
Transaction Costs
Here is a breakdown of the transaction costs involved in purchasing real estate in Egypt:
- Registration Fee: EGP2,000 (US$72), paid by the buyer.
- Legal Fees: Approximately 3% of the property value, paid by the buyer.
- Real Estate Agent’s Fee: 2.75% – 3.30% of the property value, paid by the seller.
- Transfer Tax: 2.50%, paid by the seller.
- Capital Gains Tax: 0%, paid by the seller.
Footnotes to Transaction Costs Table
- Registration Fees: The maximum registration fee is EGP2,000 (US$72) regardless of the purchase price of the property.
- Legal Fees: It is recommended to hire Arabic-speaking lawyers due to the complexity of the property registration process. Legal fees are approximately 3% of the property value.
- Real Estate Agent’s Fees: Realtor fees range from 2.75% to 3.30% (plus 10% sales tax), paid by the seller.
- Transfer Tax: This tax is imposed on the sale or transfer of immovable property at a rate of 2.50% and is paid by the seller.
- Capital Gains Tax: Classified as a transaction cost, this tax is imposed on the gross gains of the seller at a rate of 2.5%.
In conclusion, purchasing real estate in Egypt as a foreigner involves navigating legal requirements, understanding ownership options, and considering various costs. It is recommended to seek the guidance of legal advisors and real estate experts to ensure a smooth and successful property acquisition process.
