Explained: The Real Estate Finance Oversight Commission

The board of directors of Syria’s Real Estate Finance Oversight Commission (REFOC)  was reorganised in recent weeks following a decree by the prime minister in March. The move is an attempt to activate the body, which has remained largely dormant since its inception.

The REFOC was established under Law No. 39 of 2009. It enjoys legal, financial, and administrative independence and is affiliated with the Minister of Finance. It is headquartered in Damascus, though it may establish branches and offices in other governorates.

Law No. 39 of 2009 defines real estate financing as the activity of financing real estate investment in the housing, industrial, touristic, agricultural, and services sectors, as well as in other sectors determined by the Minister, whether for the aim of purchasing, building, repairing, or improving housing, service installations, or real estate specialized for housing, industrial, touristic, agricultural, or services activities, or other aims determined by the Minister.

Law No. 39 stipulates that the goal of the REFOC is to regulate and oversee the real estate finance sector, develop savings in the real estate sector and work to regulate the real estate finance market. It also aims to protect the rights of the various stakeholders participating in real estate finance, as well as ensuring they adhere to their financial obligations. The REFOC also works to provide funding to various sectors of society according to their needs and financial capabilities, while considering the conditions of low and middle-income Syrians and new families. Finally, it prepares and finalises the procedures for issuing draft laws related to real estate financing.

In theory, the REFOC is meant to monitor the real estate market in a manner that helps regulate and direct finance activity, in coordination with the Monetary and Credit Council, a body affiliated with the Central Bank of Syria.

Real estate funding or real estate development?

It does not yet appear that any of the real estate finance companies that were supposed to be licensed under Law No. 15 of 2012 have actually come to fruition, amid a convoluted legal and legislative environment that regulates both real estate finance and real estate development. Also, not a single real estate development project planned under Law No. 15 of 2008  has been established . There are overlapping areas where Law No. 39  mixes up the two concepts, and where it is difficult to discern between the role of the REFOC and the Real Estate Development and Investment Commission, which is tasked with preparing policies and general plans for real estate development and investment under Law No. 15 of 2008, and securing the housing needs of low-income families.

According to a recent report, the new management of the REFOC relies on finance companies for securing the necessary funding for the Real Estate Development and Investment Commission. The separation of powers between the two bodies is further muddied where the report focuses on the process of attracting funding and investment to finance construction and rehabilitation of residential suburbs and “areas damaged by acts of terrorism”, as well as establishing new ones in coordination with the beneficiaries and owners of such projects.

Real Estate Finance Companies

According to pro-regime media, the general manager of the REFOC is reorganising it in order to avoid the same problems and obstacles that have thus far prevented the establishment of real estate finance companies and refinancing.

Law No. 15 of 2012 for the establishment of real estate finance companies, was issued to regulate the process of establishing licensed real estate finance companies and refinancing companies.

Law No. 15 also determined the minimum capital for real estate finance companies at SYP 1.5 billion and authorised their creation in the form of joint-stock companies. They were given the freedom to trade shares and allowed foreigners to own up to 49 percent of their shares. The law permitted banks operating in Syria to establish real estate finance companies but prohibited the companies from receiving deposits.

Real Estate Appraisal Expert

Under Law No. 15 of 2012, the REFOC grants licences to appraisal experts.

According to the law, an appraisal expert must be used in every financial transaction that involves a real estate guarantee. In April, the REFOC issued an official list of licensed real estate appraisal experts for 2021.

The licenses are granted for one year and may be renewed. Licence applicants are required to have a university degree in economics, law, civil engineering, or architecture. They must be at least 25 years old and hold Syrian citizenship and must have spent at least two years as a trainee at a licensed real estate appraisal office.

According to statements made by officials at the REFOC, appraisals made by these experts are used in other processes, such as determining real estate prices. They are essential for setting real estate sales taxes and Cadastral Affairs fees, which depend on the “current value” for real estate.