When Natnael Belay entered Addis Abeba’s land market, he believed he knew the cost of his bet. He secured a 150Sqm plot in Nifas Silk Lafto District at 36,660 Br a square metre through auction, paid the down payment and began servicing the balance.

Now, the City Administration has sharply revised the benchmark lease prices that govern such holdings in areas such as the Arada, Qirqos, and Lideta districts. Natnael's remaining payments will be recalculated under a far higher rate.

After a two-year pause, the Addis Abeba City Administration Cabinet has approved a new benchmark schedule under the amendment to the Urban Lands Lease Holding law issued in 2024, and a related regulation. The decision lifts minimum lease prices and revises how plots are graded. It rests on two benchmark tables used by the City Land Administration Bureau. There is one for land acquired through allotment, and another for plots transferred through auction or regularisation.

Under the previous allotment schedule, prime land was benchmarked between 29,000 Br and 39,000 Br a square metre, while the lowest category ranged from 2,800 Br to 6,846 Br. A cabinet decision in June last year sharply increased these figures. The benchmark for prime land acquired through allotment increased by more than half to 60,688 Br a square metre. The minimum benchmark jumped from 2,800 Br to 16,355 Br, nearly a 500pc increase.

The second table, amended more recently, sets minimum prices for plots transferred through auction. It also applies to plots acquired before urban areas adopted the leasehold system that are converted to leasehold, and to land held without a lease agreement when leasees formalise their rights and create landholding rights. In all these cases, obligations are calculated using the revised benchmark. The amendment expands the city’s pricing structure from 18 to 30 categories. Land is grouped into five main grades, further divided into 30 sub-grades.

Kibrom Assefa, chairperson of the Land Auction Committee and head of the auction rounds, argued that the revised grading system helps plots fetch their “real value.”

According to the Land Bureau, several factors are considered when assigning a benchmark, including proximity to the city centre around Piassa, access to roads and infrastructure, development costs, developers demand and the condition of existing structures. Plots that meet more than 90pc of these criteria are classified as grade one.

For these top-rated plots, the maximum lease benchmark price was previously 2,218 Br a square metre. Following the amendment, it surged by 357pc to 10,108 Br. Grade two plots, which meet about 80pc of the criteria, were benchmarked at 1,327 Br, and their revised benchmark is 8,070 Br, a jump of 508pc. Plots on the outskirts saw steep increases as well, with benchmarks climbing from 814 Br to 3,254 Br a square metre, nearly four times the initial rate.

However, these higher benchmarks sit below what bidders have recently been willing to pay. In the eighth auction round held two weeks ago, a square metre of land in Kolfe Qeranyo District was leased for 156,080 Br. During the same round, 134 plots covering 39,601Sqm in eight of the city’s 11 districts were leased at prices above the revised benchmarks. The average auction price reached 13,101 Br a square metre, almost 30pc higher than the maximum benchmark of 10,108 Br.

It is in this gap between official threshold prices and market outcomes that policymakers in the city Administration bank on. The new benchmarks apply when older holdings are converted to leasehold or regularised, outstanding payments on existing leases are recalculated, and valuations are prepared for collateral, court cases or investment decisions.

According to people who follow the city's land-lease market, higher official prices can boost the book value of land held as assets while raising the cash burden on those still paying for it. Some in the real estate industry warn that the revision will make older holdings more expensive and less attractive to developers. Ermias Fekade, a longtime market observer, observed that developers already pay the initial holders millions of Birr to acquire such plots.

"Once the land is converted into leasehold, they should pay an additional amount calculated using the revised benchmark price," said Ermias.