Fortune News | Mar 09,2019
Jun 6 , 2021
Businesses with an investment proposal below half a billion Birr in capital can no longer apply for land lease in Addis Abeba exceeding 5,000sqm.
The City Administration has notified agencies tasked to review investment proposals, including the city's Investment Commission and Land Bank Office, to stop accepting requests from developers with companies having less than the capital, a third of which is expected to be presented on a bank statement or with an equivalent insurance collateral warranty.
Authorities expect the new rule will reduce the concentration of investment projects in the city and help them identify investments with "great national importance." The new directive, enforceable on all developers, including those from the hospitality industry and the manufacturing sector, became effective beginning May 26, 2021.
This development coincided with the surge in demand by businesses for leasing land and was introduced a month after the city's cabinet decision to avail 138ht of land to religious institutions, businesses, industries, and civil society organisations.
Over 50ht has been allotted to 59 manufacturers,and another 27.3ha to 27 developers for mixed apartments and hotels use.
"We've seen an unexpected surge in demand for land, while most plots, which we have designated for developers, have been taken," said Sahle Fersha, deputy head of the city's Land Management Office. "While this has prompted the administration to review its rules, the impact the excessive demand to invest in Addis may have on other regional towns played its share in the introduction of a new directive."
Prospective developers are also required to register at the city's Investment Commission before the City Administration approves their proposals to lease a plot of land exceeding 5,000sqm.
"They also need to prove that their projects have national importance, which will be reviewed based on the number of jobs they create an impact on the livelihoods of residents," Sahle told Fortune.
Title deeds for 44 plots across all districts are under transfer to the same number of companies, including Marathon Motors and Aliyah Trading.
An additional 18 plots of land are also being transferred to different developers involved in the hospitality industry, including Belayneh Kinde, who leased over 5,000ha of land to develop a hotel with an investment capital of 560 million Br in Arada District, and GetAs International of Getu Gellete, which has pledged to invest 2.5 billion Br on 5,116ha of land it has received in Qirqos District.
"The hotels and malls need to be mixed functions, which they have agreed to comply with during the investment appraisal process," said Sahle. "We don't want the malls to be a single-purpose property, like the existing ones."
Although land in Addis Abeba is available for development through allotment or auctions, it is the first that has been largely used over the past three years. Three has been no auctions, a development contrary to the 15 years before 2018 where 29 rounds of land lease auctions were carried out. The 30th round was suspended by the former Deputy Mayor of the capital, Takele Uma, five days after bidders had begun buying bid documents.
The city is now under preparation to restart the auctioning regime for residential, commercial, and mixed purposes, Sahle disclosed to Fortune.
"We'll keep availing land to projects with greater national importance after reviewing their investment proposals, but only if they meet our new requirements," Sahle added.
Despite this, however, developers have already started voicing concerns over the land allotment process, claiming that the proposal appraisal process fails to take the goodwill of businesses into account. One of them is Endale Genemo, a major shareholder of Endale & Family Plc, which owns Churchill View Hotel.
Endale`s company plans to expand on the hotel located on Churchill Road, nearby Tewodros Square, with a project cost of 400 million Br. The company has applied to lease a 2,000sqm plot, a request lingering for almost a decade, while he saw an 8,000sqm plot nearby was leased to another developer.
"This is unfair, and everyone could have benefited had the administration availed land to all of us in a fair manner," he told Fortune.
Endale believes the land allotment regime is prone to unscrupulousness on the part of officials.
"The process has sidelined investors having a good track record and needs rechecking as it seems to be exposed to corruption," he said.
"Our door is still open to anyone with complaints against the allotment process," Sahle told Fortune. "We work based on the land lease laws of the country and directives of the City Administration."
Out of 1.3 billion Br investment projects that went operational during the last year, more than half in Addis Abeba, with the share of 76pc. With the capital being the preferred destination for many domestic and global investors, there has been a concern that this would further widen the disproportionate growth between regions, hence income inequality with towns and other cities.
Though the new restriction put on developers is meant to reduce the concentration of investments in the capital, Abnet Belay, a consultant with 14 years of experience and owner of MPE Advisory Firm, doubts its effectiveness.
"Discouraging investors cannot alone be a solution to ensure equal distribution of wealth across regions," Abnet said. "The government needs first to rebuild investors' confidence and ensure peace and stability, a major reason for investments flocking to the capital."
Other cities with relatively better opportunities and investments flow are also following suit.
Bahir Dar, the seat of the Amhara Regional State, has recently introduced new rules discouraging developers with limited capital, hoping to redirect investments to neighbouring towns. Applications for land placed by 661 developers are pending at the region's Investment Commission & Land Management Bureau, sources disclosed.
PUBLISHED ON Jun 06,2021 [ VOL 22 , NO 1101]
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