Egyptian property developers discuss CPA’s potential scope for intervention

The agency’s role would be to control the local real estate market between developer and consumer

Image used for illustrative purpose. Heliopolis district in Cairo.

Image used for illustrative purpose. Heliopolis district in Cairo.

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Egyptian real estate developers have unanimously agreed that the intervention of a government agency, represented by the Egyptian Consumer Protection Agency (CPA), must come with specific mechanisms and controls.

The agency’s role would be to control the local real estate market between developer and consumer.

Real estate developers also emphasised the need for coordination with the CPA in setting those controls that give consumers their rights in a way that does not incriminate real estate developers.

The CPA was established by Law No 67 of 2006, with the aim of safeguarding consumer rights and interests in any exchange of goods or services. The law was amended by Law No 181 of 2018, which added a new role to the CPA that would allow them to control real estate products complaints.

The Consumer Protection Law gives the CPA the right to intervene in anything related to the consumption of a good or service. The agency will also have some involvement in some points specified under Egypt’s real estate law or by the real estate developer, in terms of the specifications of housing units, or dates of delivery and receipt, and conditions in the signed contract.

In early August, the CPA announced that it had received complaints related to the real estate sector regarding the arbitrary and monopolistic practices of many real estate development companies towards their clients. The complaints noted that these practices are seriously harmful to consumers, and take advantage of the difficulties clients have faced in buying another property, or converting to other residential compounds.

Among the most salient of the practices the CPA deals with, with regard to Egypt’s real estate market, is the requirement that some customers face in paying sums of money that are considered arbitrary conditions unrelated to the original contract.

Other practices that have come to the CPA’s attention include: suspending the provision of a service on the acceptance of conditions not related to the nature of this service; and forcing residents to deal with one supplier for various services despite the presence of other suppliers.

Moreover, client access to basic facilities such as electricity, water and other utilities is conditioned by more financial costs contradicting the contract terms.

Tarek Shoukry, Head of the Real Estate Development Chamber at the Federation of Egyptian Industries (FEI), said that there have recently been several client complaints submitted to the CPA, due to delays in delivering their units.

“Our goal is to find a balanced relationship with all parties [government, developers, and clients] and preserve the rights of all,” Shoukry said, “We would like to emphasise that the CPA works in accordance with the law, which is what we agree upon.”

He said that all developers work to implement the laws and control the work system in the real estate market. However, the chamber and developers require a dialogue to occur between all parties involved in the real estate development system, without undertaking decisions based on the vision from a single point of view.

As a result, there must be a balanced discussion between the CPA, developers, and clients, as well as an independent technical entity. This discussion would review complaints and facilitate a clear vision and action plan for the coming period, Shoukry said.

Accordingly, the Real Estate Development Chamber plans to hold a meeting with the CPA to discuss customers complaints regarding the dispute. This will then be presented to the parties involved to develop a plan of action and a clear vision that preserves the rights of all parties, Shoukry disclosed.

Hany El-Assal, member of the Estate Development Chamber and chairperson of Misr Italia Properties, said the CPA intervention must be undertaken correctly and without misuse of this right. He noted that the real estate sector, as a product, is different from any other product.

El-Asaal said that a special law must be issued to regulate the relationship between consumers and real estate company owners. The draft law for the federation of real estate developers has been discussed and submitted for a cabinet decision, which includes both consumer and professional protections.

He added that contracts concluded between the state, developer, and consumer, must be balanced, whilst also guaranteeing the rights of each party in this sector.

Moreover, he pointed out that there are circumstances that compel developers to delay the delivery of housing units on time. Delays may also occur on the consumer’s end, as they may be forced by circumstances to delay payment of instalments.

For his part, First Group CEO Basheer Mostafa said that the number of fictitious companies have recently increased in the local property market. Their presence harms the profession, and leads to the CPA’s intervention in resolving customer problems relating to the real estate market.

Mostafa noted, “Despite the importance of the CPA’s role as a legal entity, it is far removed from the mechanisms of the real estate development profession.”

He added that the government should hear from developers and form another entity which would be responsible for solving such issues, which would be undertaken if the federation of real estate developers draft law approved.

An example of how real estate sector complaints are resolved can be seen in the imprisonment, in August this year, of the owner and director of the Golf Park Company for Tourist Facilities. The case was heard by the Cairo Economic Court, which handed down the sentence of one year’s imprisonment with hard labour, and bail of EGP 20,000. The pair were also obliged to pay criminal expenses.

In July 2019, the CPA received a complaint in which the complainant outlined how they had been affected by their contracting with the company. The complainant purchased a real estate unit, a chalet, from the company in 2013 and, according to the contract, was supposed to receive the unit within two years from the date of the contract.

Although the complainant had paid the unit’s full price, they have yet to be handed the unit. The company was also found to have hiked the unit’s price, and demanded that the complainant pay additional sums other than those stipulated by the contract.

The second sentence handed down was related to a real estate developer who asked for EGP 30,000 in return for waiver expenses, and was fined EGP 200 by the Cairo Economic Court.

A source refused to mention the name, under the pretext that this would affect the sector badly as it seizes foreign direct investments (FDI) in the sector. The source also said that the issue may be resolved in different ways, other than through imprisoning investors. Doing so only exports a bad image, the source added, and ensures that foreign developers would be afraid to invest in the Egyptian market.

He said that just as there are committed companies who do interact above board with customers, there are also companies who are lacking in professionalism. The CPA can open a dialogue with developers to identify other penalties rather than imprisonment.

The source suggested some ways to handle and resolve customer complaints through, for example, compensation to the consumer with a financial amount. This may also include other forms of compensation, such as offering discounts on the unit’s value if the units have not been handed over.

Customers may also be offered a finishing service, if the contract does not provide for this. They may also be furnished with an additional period for payment or any other means that satisfies the customer, rather than resorting to courts and defamation of some companies, which harms the sector as a whole.

Abeer Essam, Chairperson of Ammar for Building, said that the CPA’s oversight of the performance of real estate companies is required, but with controls.

Essam added that the issue of CPA intervention in the real estate sector without controls will cause great harm to real estate developers, because every citizen who disagrees with the developer will immediately go to the agency.

She said that real estate products are completely different from any other product, and consumers may turn to the CPA because of minor defects in their housing unit. This explains why the agency has moved to protect the citizens and their rights without referring to technicians in this matter.

Essam also said that the CPA must have experts or consultants to evaluate real estate products to avoid such issues cropping up in the future.

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