Update on Moscow City's Share in AFIMALL City

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IN OR INTO THE RUSSIAN FEDERATION, THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN

Update on Acquisition of Moscow City's Share in AFIMALL City

London, 15 July 2011 - On 25 March 2011 AFI Development ("AFI Development" or "the Company") announced that it had reached a non-binding understanding with the Moscow City Government regarding the purchase from the City of Moscow of its 25% share in AFIMALL City and 2,700 parking lots adjacent to AFIMALL City, for a total consideration of approximately US$310 million.

The Company today provides an update that, pursuant to the said non-binding understanding, Bellgate Construction Ltd (the Company's subsidiary), which is a party to the investment contract with the Moscow City Government in relation to AFIMALL City (the "Investment Contract"), has entered into a supplement to the Investment Contract (the "Supplement"). Pursuant to the Supplement the Moscow City Government will assign its right to receive 25% of the areas of AFIMALL City to Bellgate for a total consideration of 5 billion Roubles, including VAT (approximately US$180 million, including VAT), to be paid by the end of September 2011.

The Supplement does not deal with the parking lot adjacent to AFIMALL City. However, this is covered by the aforementioned non-binding understanding, and the Company is currently in negotiations with respect to this matter with the Moscow City Government, as the second stage of implementing the non-binding understanding.

The Company notes that the Supplement remains subject to internal approvals of various departments of the Government of the City of Moscow. The Company will receive an approved signed Supplement from the Moscow City Government only once the Supplement has been duly approved by the relevant departments of the Government of the City of Moscow.

The Company is currently in discussions with various banks regarding the provision of financing for the abovementioned buy-out from the City of Moscow of its rights in AFIMALL City. The Company aims to have the financing in place by the end of September 2011.

Commenting on today's announcement, Lev Leviev Chairman of AFI Development said: "I'm pleased to be able to announce our significant achievement in our negotiations with the Moscow City government regarding AFIMALL City. We look forward to completing the first stage of the agreement by obtaining the full ownership of AFIMALL City, which we believe will add significant additional value to our Mall from an investment point of view. Although The Mall has only been open for a few months it has already become one of the best retail projects in Russia's capital and we look forward to its continued success in the future".

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For further information, please contact:

AFI Development

Alexander Adadurov +7 495 796 9988

Natalia Ivanova

Citigate Dewe Rogerson, London+44 20 7638 9571

David Westover

Sean Bride

About AFI Development

AFI Development is one of the leading real estate development companies operating in Russia. Established in 2001, AFI Development is a publicly traded subsidiary of Africa Israel Investments Ltd.

AFI Development is listed on the Main Market of the London Stock Exchange and aims to deliver shareholder value through a commitment to innovation and continuous project development, coupled with the highest standards of design, construction, and quality and customer service.

AFI Development focuses on developing and redeveloping high quality commercial and residential real estate assets in Moscow, the Moscow Region, and other major cities in Russia and the CIS. The Company's existing portfolio of 30 development projects comprises commercial projects focused on offices, shopping centers, hotels and mixed-use properties, and residential projects. AFI Development's strategy is to sell the residential properties it develops and to either lease the commercial properties or sell them for a favorable return.

AFI Development is a leading force in urban regeneration, breathing new life into city squares and neighborhoods and transforming congested and underdeveloped areas into thriving new communities. The Company's long-term, large-scale regeneration and city infrastructure projects establish the necessary groundwork for the successful launch of commercial and residential properties, providing a strong base for future.