By Yehualashet Tamiru
Real estate business is a very recent phenomena in Ethiopia. The business has flourished with the advent of privatization in the early beginning of 1990’s more particular after 2002 when the government take a drastic to incentivized construction of condominium houses with a market-oriented lease law.
Although the current legal regime does not allow outright ownership of land, most of the restrictions in relation to land use had been removed. Real estate business on top of being the driving machine behind the economic development of the country, it has also been a significant contributor for middle- and high-income earners families house issue. Despite this the business is not well regulate by law which raised some of the rarest and undesirable consequences and lack of trust between the developers and the purchasers of houses. Thus, the law makers with the view to curve this problem comes up with a draft proclamation that regulate the sector.
The cornerstone principles of the draft proclamation, among other things, includes: to create a modern operating system for efficient and effective real estate development marketing and valuation service delivery, to ensure stakeholder continues engagement and satisfaction with a transparent and accountable real estate development marketing and valuation system and to develop a real estate development marketing and valuation system that is governed by law and market principles for national economy and cities competitiveness.
Under the draft proclamation, real estate is defined to means a property consisting of building and associated structures built for service, dwelling, sale, lease or rent. Whereas real estate developer is defined as any person who engages in real estate development, builds more than fifty houses individually or partnership with government or other persons, makes available it for sale, lease or rental.
Any Ethiopian national and foreign nationals of Ethiopian origin may be registered as local real estate developer under provided that: any person who is allowed to engage in the real estate development sector under the investment law and have a plan to build and transfer the number of houses to be specified by the regulation to be enacted. A foreign investor, who fulfill the minimum capital requirement under the investment law have investment permit and reinvest and uses all the incomes derived from the real estate business locally, may also be registered as a local real estate developer. Moreover, any person who wants to build a home below the number specified in the regulation can build a real estate by leasing land in a formal lease auction or on his former permit holdings without needing to register as a real estate developer.
A foreign investor who has an investment permit, complete registration in commercial register, and receive a business license may also be registered as a foreign real estate developer when he meets one or more of the following conditions: who can allocate more than 20 Million USD capital and build more than 10,000 houses, 40 percent of which are built for affordable housing for the low-income which means earn three USD or imports, real estate construction inputs which is not available locally in the required amount and quality required by the investment, through the Ethiopian National Bank franco valuate system without using its own foreign currency and reinvest and uses 60 percent of the incomes derived from the real estate business locally without repatriate foreign currency for 10 years or save foreign exchange, that is equivalent to the incomes derived from the real estate business, by establishing domestic construction inputs production facility that can replace foreign imports.
A foreign real estate investor cannot be registered for pre-sell, to sell the home prior to the completion of construction is not permitted. However, local real estate developers can register for pre-sell by considering the shortage of local capital. Despite this, local developer must comply with the following bail conditions when they pre-sell home, to sell the home prior to the completion of construction. This conditions are: the real estate developer must notify his plan of pre-sale to the authority and get license, the land holding certificate that the real estate developer intends to undertake pre-sale shall be submitted to the authority and held there until the house are built to the beneficiaries, the money to be collected from home buyers shall be deposited or hold in a closed bank account that shall be opened with the permission of the authority, the disbursement of funds deposited in the bank account, it shall be determined in the regulation to be enacted for the implementation of this proclamation and the authority shall support home buyers to organize themselves in cooperatives in accordance with the cooperative’s act, and establish a system to monitor their social and economic benefits.
Any real estate developer who completed 70 percent of construction work respecting the permitted building requirements have a right to request a land holding or property ownership certificates for each salable unit.
As a matter of principle, the real estate developer cannot register customers and collect advances prior acquiring land holding certification and construction permit to build the houses from appropriate body. When the real developer transfers the house to a customer, he is obligated to request the client’s source of capital and notify the relevant government body.
Yehualashet Tamiru is Associate at MTA, Adjunct Lecturer at AAU and can be reached via email@example.com