Viewpoints | Apr 22,2023
Officials at the Addis Abeba City Administration have recently changed the title transfer fees following revised building valuation rates imposed by the Construction Regulatory Authority. This move aims to address the discrepancy between outdated construction cost valuation estimates and current market conditions.
The authorities believe the previous valuation estimates, in use for the past five years, failed to reflect the current state of the market. The revised rates are designed to better align with present construction costs and inform real estate developers in making accurate financial assessments, according to Sitotaw Akale, head of the Construction Regulatory Authority.
He instructed the city's Land Holdings & Registration Agency to apply the new rates.
The new system calculates title transfer fees by considering the size of plots and the estimated construction cost. The Agency charges a six percent transfer fee based on these factors. Notably, the valuation rate for one square meter of a single-storey building has doubled from 10,000 Br. Properties with more than 15-story would be subjected to 40,000 Br for a square meter.
Sitotaw believes that the adjusted rates were necessary due to impending inflation.
"The revised rates aim to give developers a more realistic account of costs and facilitate improved contractor selection criteria," he told Fortune.
Before implementing the new rates, a comprehensive two-month-long study was conducted, considering current construction input prices.
Melkam Ayalew heads the Department of Property Evaluation at Debre Markos University. He argued a blanket rate imposed simultaneously might not accurately capture properties' market value. Instead, he proposed that evaluations should be based on the specific nature of each property, including its location and construction type.
The new rates have already been implemented by the Land Holdings & Registration Agency's cadaster system, with evaluators across the capital adopting them for the past week. The Agency's cadaster system manages holdings registered under its jurisdiction, covering 27pc of the 600,000 plots in the city. The remaining falls under the Land Development & Administration Bureau.
The Bureau has transferred no less than 120,000 parcels of land to the Agency`s Cadaster Mapping System this year, disclosed Hassen Muda, the Information Service Head at the Agency.
The Agency had previously established a digital infrastructure that consumed 67 million Br, whose contract was awarded to a Chinese firm, Hansa Luftbid, almost a decade ago. The Agency has been managing the system on its own since the contract period ended.
The cadaster system, created under Gifawosen Desisa, the head of the Agency, was implemented to address discrepancies between blueprints and actual land holdings. Its purpose was to prevent illegal holdings and the expansion of plots. Hassen claimed the system effectively prevented the illicit merging and slicing of plots, ensuring proper land management practices by the Agency.
Abush Abera, a broker with a decade of experience in the capital, pointed out existing loopholes that allow property undervaluation and rampant tax evasion. He expects this practice to continue with the increased rates.
The Agency has witnessed significant revenue growth, collecting 2.8 billion Br in the third quarter of the current fiscal year, one billion Birr higher than the previous year. This surge in revenue can be attributed to the increased title transfer fees resulting from the revised valuation rates.
Despite the Agency's efforts to ensure accuracy and transparency, property owners are discontented with the new rates.
Wenit Hailu, Land Holding & Registration Branch head in Kirkos District, saw customers surprised by the new rates. However, Wenit believes that the Branch's role is limited to implementing and not changing the rates. Her Branch registered more than 21,000 parcels into the cadaster system, with five Werdas in the process of being included.
Wudineh Zenebe of the Bole Branch acknowledged that while the new rates better reflect property values, they still do not entirely align with the actual market prices. Managing a busy Branch with 67,593 housing units in the cadaster system, Wudineh witnessed initial customers' apprehension and resistance during the first few days of implementing the new rates.
PUBLISHED ON May 29,2023 [ VOL 24 , NO 1205]
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