Decree_66 – Syria Report

Legislative Decree No. 66 of 2012, which established two zoned real estate areas within Damascus governorate as part of the general plan for the capital city, compensated some rights holders with zoning shares in these two areas. This article explains what is meant by “zoning shares” and how people obtain them.

Decree No. 66 clarified that those entitled to zoning shares are owners of built properties within the zoned real estate area who have proven their ownership with official documents and endorsements. This mainly refers to owners of properties that were registered and documented in the Land Registry prior to the establishment of the new zoned real estate areas. However, non-compliant owners who have built on public lands, or on private agricultural lands where construction is prohibited, might instead be allocated not free alternative housing but will not be entitled to zoning shares.

As for renters, Decree No. 66 stipulated that tenants of properties within the zoned real estate area whose rental agreements are subject to the provisions of the old Tenancy Law No. 111 of 1952 are also entitled to zoning shares. Essentially, this means that the property is officially documented in the Land Registry. In such a case, a tenant occupying the property is entitled to a share equivalent to 30 percent of the estimated value of the residential property they occupy, and 40 percent for a tenant occupying commercial property.

The 2012 decree also stipulated dividing the zoned real estate area into plots, which are jointly owned by the owners within the zone. The value of the plots are estimated and then distributed in the form of joint shares, or zoning shares, amongst the rights holders by a distribution committee. This committee is formed by a decision of the governor and is chaired by an advisory judge appointed by the Minister of Justice. It also includes two real estate appraisal experts appointed by the Minister of Housing, and two representatives from amongst the area’s property owners.

The zoning shares for each rights holder are calculated according to complex processes carried out by several committees, in accordance with Decree No. 66. To put it simply: an initial committee estimates the value in Syrian pounds of the properties owned by rights holders, which were constructed before the establishment of the zoned real estate area based on prevailing prices at the time of the procedure. Subsequently, the area becomes joint communal property of the rights holders, though each person theoretically retains their share. Following this, another committee calculates the Syrian pound value of the plots intended for construction, specifically designated for rights holders, as per the zoning plan. Each of these is referred to as a zoning plot. The Damascus governorate is entitled to allocate large areas within the zoned real estate area, free of charge, for the establishment of service or investment plots. There are no clear criteria for valuation, as these plots have not yet undergone construction. After the valuation, the value of the zoning plots is divided among the rights holders, who each receive their zoning shares.

The distribution committee issues its definitive final decision, which includes the names of those entitled to shares of the zoning plots as joint owners. The Damascus governorate also releases nominal data about the joint zoning plot shares and delivers them to the owners based on the distribution committee’s tables. This data should list the name of the zoned real estate area, the names of the shareholders, the number of shares, and the total count of shares for the zone.

Owners of the zoning plot shares can begin trading their shares within a year after the governorate announces the final distribution scheme. However, initially, the rights holder’s share ownership must be registered with the Damascus governorate. Subsequently, anyone can access ownership information of the shareholders from the share registry and obtain a certified copy in exchange for a fee set by the governorate. The governorate also charges a five percent fee of the traded share value for every share trading transaction.

The process of transferring and registering the ownership of zoning plots is conducted in the Land Registry, in accordance with the current status of the joint share owner. If someone has a large share, they can apply for an independent zoning plot that is equivalent in value to the shares they own. The executive office in the governorate then issues a decision to allocate the plot and register it under that person’s name. This decision is announced on the governorate’s notice board and a copy is sent to the Directorate of Cadastral Affairs for the property registration procedure.

For those who own smaller shares that don’t equate to an independent zoning plot, Decree No. 66 allows them the option to establish a joint-stock company under the Companies Law. In this scenario, the governorate issues a decision to allocate the shares to the company, announcing it on their notice board. The governorate also sends a copy of this decision to the Ministry of Economy and Trade for establishing a joint-stock company and another copy to Cadastral Affairs for registering the plot ownership under the company’s name. Properties within the decree’s zone of implementation are exempted from land registration fees.

Decree No. 66 prohibits the ownership and allocation of more than one zoning plot, whether by individuals or companies. If it is not feasible to establish or join a company, the only option left for a small shareholder is to sell their shares via public auction. In such cases, the Damascus governorate forms a special committee, in accordance with Contract Law No. 51 of 2004, to sell the zoning plots. The proceeds from the sold plots are then deposited in the Damascus governorate’s account at the Central Bank of Syria, labelled as a “trust account”. The governorate may not use the funds of the owners of the sold zoning plot shares. This group of zoning share owners is the most adversely affected as they are forced to sell at auction prices that builders compete for.

The Directorate for Implementation of Decree No. 66, which is affiliated with the Damascus governorate, announced the commencement of share trading for the second regulatory zone south of the Southern Ring Road, called Basilia City, starting from May 15, 2023. The trading period will last until May 15, 2024. A square metre consists of 339,615 shares, according to the the Finance Directorate of the Damascus governorate. Article 25 in Decree No. 66, set the price of a single share at SYP 1.

The Damascus governorate’s Directorate of Decree No. 66 Implementation announced earlier this month that trading would begin for shares in Basilia City as of May 15, 2023, and would last for one year. Such tradition involves the partial or total transfer of shares’ property between owners. Such trading aims to consolidate the shares in the hands of a few owners, which will ease the process of allocating designated plots for construction.

Decree No. 66 of 2012 stipulates the establishment of two zoned real estate areas in Damascus governorate within the general plan for Damascus city. One of the zones (the second one) was to be located south of the Southern Ring highway and known as Basilia City. It would have an area of 954 hectares and more than 100,000 ownership deeds. Under Decree No. 66 and the subsequent Law No. 10 of 2018, real estate in the area would be redistributed to rights holders after zoning via shares. Any property owner who occupied their piece of real estate there before this zoning would receive shares and the right to apply for alternative housing, which they would pay for out of pocket. Those who were living on properties they didn’t own would receive only the shares without the option of alternative housing.

The number of shares given to each rights holder is calculated according to a complex set of processes carried out by multiple committees, according to Decree No. 66 of 2012. First, but to simplify the process, an initial committee appraises the lands and properties existing in the area before zoning in Syrian pounds. After this, the zoned area is converted into common ownership, shared between the rights holders. Then, after deducting the Damascus governorate’s share, another committee calculates the value of the organisational plots allocated for construction to the rights holders based on the zoning plans prepared for the area.

Afterwards, the calculation of the value for these plots is also done in Syrian pounds, albeit without any clear criteria yet in place. Then the value of these plots is divided among the rights holders according to their individual shares. This is how each rights holder receives what is called organisational shares.

Under Decree No. 66, a share owner has three options: convert their shares into organisational plots, sell them via public auction or establish or join a joint-stock company.

In July 2021, the Damascus governorate announced the nominal values of these organisational shares due to the property rights holders and the nominal values for organisational plots in Basilia City. In practice, rights holders received about 35,000 shares per square metre of their original properties on the site, according to the estimated values of the properties as announced by the Real Estate Appraisal Committee in February 2021. The governorate invited rights holders in Basilia City to receive their title deeds for these shares throughout 2022. Following the distribution, the trading period for these shares began.

A correspondent for The Syria Report spoke with an informed source familiar with the work of the Directorate of Decree No. 66 Implementation, who said that the directorate unofficially set the initial price per share at SYP 1 as an initial offering. According to the correspondent, this initial price is not related to the actual trading price, which is subject to supply and demand during the trading period. The price per share currently starts at SYP 10 and goes up to SYP 200.

Most of the shareholders have organised themselves into groups, some of which operate over social media platforms, aiming to gather as many shares as possible and sell them at reasonable prices or allocate them and acquire plots for construction. Those who own only a small number of shares tend to sell them, while owners of many shares have usually consolidated or coordinated with others to allocate one or more complete subdivisions. These groups have also aimed to regulate share prices to improve negotiation opportunities with contractors or real estate companies seeking to purchase the shares.

According to the correspondent, no actual sales transactions have taken place yet, as the process is still entirely at the stage of negotiation over prices concerning supply and demand. On average, though, the going rate per square metre of apartment space (unbuilt yet) within residential plots in Basilia City is 350,000 shares. Put more simply, a 100-square-metre apartment in Basilia city is worth 35 million consolidated shares. (The correspondent added that some real estate companies have offered up to 48 million shares as an initial price per 100-square-metre apartment). And suppose the trading price per share remains at SYP 10. In that case, a 100-square-metre apartment in Basilia City would equal about SYP 350 million (about USD 39,000 according to the current black market exchange rate of SYP 9,000 to the dollar). Notably, these apartments and plots have not yet been constructed.

There is a clear disparity between shares before and after zoning: The Damascus governorate has appraised each square metre in the area before zoning to be worth 35,000 shares, while the value per square metre after zoning is 350,000 such shares. Subsequently, every 100 square metres of original pre-zoning real estate in the area is now equal to just one square metre of an apartment in a residential plot.

Trading conditions

According to the Directorate of Decree No. 66 Implementation’s website, people wishing to trade their shares must first address any obstacles to property transfer, such as mortgages, liens, expropriation, and termination of common property ownership, if applicable. However, the Director of Cadastral Affairs in Damascus governorate indicated that any such obstacle can be removed after the concerned party submits a special request to the directorate for individual study based on a review of the property documents and that property’s Land Record. Then the necessary decision will be issued to either approve the request or refer it to the relevant judicial authority.

Afterwards, the applicant must submit a file to the Directorate of Decree No. 66 Implementation containing the following documents:

A title deed for the organisational shares issued by the Directorate of Decree No. 66 Implementation;
A clearance certificate from the Directorate of Finance and the Damascus governorate;
Two copies of the organisational shares trading contract.
A copy of the contractual parties’ IDs;
A storage mechanism to preserve the documents.

Notably, the validity period for the clearance certificate is just one month.

However, the directorate does refer to some exceptional cases. For example, if a seller cannot show up, an authorised agent may attend the sale on their behalf. In the case of a purchase based on a court order, the documents required to complete the transfer of ownership may vary. However, the directorate did not specify these documents. And regarding share owners who have not been able to receive their title deeds for various reasons, such as common ownership between inheritors, they must follow the legal procedures in place and acquire them during the trading period. Removal of some endowment rights registered in the Land Record for certain real estate properties can be done through the governorate’s Directorate of Endowments after the directorate acquires five percent of the total shares or their current value.

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