The Council of Ministers issued Decree No. 7 on February 13, requiring 15 percent of the current value of a real estate property to be deposited in the bank in the event of the sale of that property. The deposit is a condition for completing a real estate sale and for registering the transaction with the government or the notary public.
Decree No. 7 is an amendment to Decree No. 28, which the Council issued on March 24, 2021, and which required buyers to deposit a minimum of SYP 5 million in the seller’s bank account as a condition for official departments to register the sales contract. Decree No. 28 was itself issued to amend Council of Ministers Decree No. 5 from January 2020, which stipulated that public authorities may not register a sales contract before enclosing proof that at least a partial payment was transferred to the owner’s bank account.
Essentially, Decree No. 7 of 2022 kept the provisions of the previous decrees while raising the price of the deposit. The buyer must deposit 15 percent of the property’s current value into the seller’s bank account, even if the sales contract differs in value. Under Real Estate Sales Law No. 15 of 2021, the current value is a value determined by committees from the Ministry of Finance. Real estate taxes are calculated according to the current value of a property, rather than the value recorded in the sales contract.
The owner (or his or her official representative) is entitled to withdraw the amount of that deposit after the sale process is completed and the ownership transferred. However, there are daily withdrawal limits set by the Central Bank of Syria. The Central Bank issued Circular No. 920/16 on February 22, raising the daily cash withdrawal limit in real estate sales-related cases to SYP 10 million. The circular also raised the daily cash withdrawal limit for individuals and legal entities for non-real-estate related purposes, from SYP 2 million to SYP 5 million.
The decision to raise the daily withdrawal limit in real estate sales cases came after widespread criticism of Decree No. 7. For example, a mid-priced property in Damascus city, valued at SYP 500 million based on its current value, would require the buyer to deposit a minimum of SYP 75 million into the seller’s bank account. Under the previous daily withdrawal limit of SYP 2 million, the seller would need 38 working days to withdraw the full SYP 75 million deposit in cash. Now the owner can withdraw the deposit in eight working days. At the same time, Decree No. 7 of 2022 maintains the provision from Decree No. 28 of 2021, requiring sellers to freeze SYP 500,000 in their bank account for a period of no less than three months.
From an economic standpoint, it is unclear why the government has required an increase in the value that must be deposited for real estate sales. It is possible that the government wants to increase the amount of money deposited in the banks, encourage electronic payments, and freeze liquidity for as long as possible, thereby lowering the demand for dollars in order to limit pressure on the foreign exchange rate of the Syrian pound. This, however, would stand in contradiction to the Central Bank circular, which raised the daily cash withdrawal limit and therefore allowed cash to exit the banks and circulate in the market.
Meanwhile, the Ministry of Finance recently released a report on the number and value of real estate sales between May 3, 2021, when Law No. 15 which regulates the property sales tax entered into force, and February 17, 2022. According to the report, 231,000 sales contracts were signed during this period, with the total current value of the contracts reaching SYP 7,770 billion – that is, the value of the sales during those 10 months was equivalent to 91.4 percent of the 2021 budget, which amounts to SYP 8,500 billion, according to statistics from the Higher Council for Economic and Social Planning.
Decrees No. 7, 28, and 5 all violate the Syrian Civil Code, which places no specific restrictions on the documentation of sales, transfer of ownership, or any processes of documenting ownership transfer contracts in the land registry. Under Article 825 of the Civil Code, real estate rights are acquired and transferred through their entry into the registry.