City awaits minimum of 28.4 mln birr from latest land lease bid

 By Tedla Yeneakal

 In its 51^st round of land lease tender issued this week, the Addis Ababa City Land Administration anticipates to get a bare minimum of 28.4 million birr from the leasing of land in the 110 locations it has put up for bid.

However, considering results from previous rounds of tenders, the figure is likely to be more than double.

In a tender it has put out in the administration’s biweekly Addis Lisan on Wednesday this week, the city has offered land in three sub cities namely Arada Sub City, Bole Sub City and Nifas Silk Lafto Sub City. All the land that is offered is to be used for building retail services, hotels and restaurants, residence houses, offices and social services spots.

In the Arada Sub City, the largest square meters of land offered by the City Administration stood at 3500sq. meters, an area offered for business ventures whereas the smallest is 1000sq. meters of land for an apartment complex. Similarly, in the Bole Sub City, the highest spot is a location near the Civil Aviation Authority, which covers an area of 2196 sq. meters.

In the city, leases are acquired by auction, though some prime business locations are available at set prices. Critics claim that the inability to buy land outright, the high cost of leasing land, the requirement to pay 50% up front, and problems and delays in executing lease and infrastructure agreements deter investment, both foreign and domestic.

While government officials feel that freehold is ‘totally out of the question’, critics argue that the lease mechanism is ‘tantamount to freehold’ because landholders can partially sell or extend their leases.

According to information obtained from the city land administration, fifty percent of the total lease is required as a down payment. The remainder must be paid usually within five years for a business, and within ten years for a manufacturing industry. The duration of the lease is typically 50 years for a business and 60 years for an industry, though investors can request leases as short as 30 years and as long as 99 years. Lessees must begin construction within one and a half-year of the date the agreement is signed. If the lessee fails to begin construction by the appointed date, the agreement is cancelled and the amount paid is refunded, minus deductions for penalties and charges.

The tender is open for interested parties that could buy the bid bond document for a price of 100 birr. The tender will be floating from January 26 until February 15, 2005, and will open again after completion.