The Addis Abeba City Administration cabinet has reduced interest on the annual lease payment rates for plots leased for residential and investment purposes.

The 45-member cabinet chaired by Mayor Adanech Abiebie decided to apply interest on the annual instalments instead of the lease payment arrangement, which imposed interest on the remaining balance. The decision comes after city experts conducted a study to assess the effect and viability of the new lease payment arrangement, according to Biniam Mikiru, head of cabinet affairs.

The Administration collected 4.3 billion Br from lease payments, including interest, in the concluded fiscal year. The revenue was a 7.5pc jump compared with last year.

Regional states and city municipalities interpret a law passed in 2011 governing urban land lease holding differently. Advance payments should be 10pc of the value of the lease, with the balance paid in annual instalments. Interests must be paid on the remaining balance. The phrase “remaining payment” has created confusion among regional states and city administrators.

The Addis Abeba City Administration officials have been interpreting the phrase as the residual balance after the down payment. Regional administrations such as Oromia, Tigray, and Southern states interpret the phrase as annual payments and apply interest on the yearly instalments.

Abubeker Mohammed, lecturer of land administration at Ambo University, says the previous interpretation of the law has discouraged investments and put pressure on the low-income segment of the population.

“Investors were required to pay 10pc of the lease amount upfront in addition to resuming construction within 18 months,” he said. “This has discouraged many developers from investing in the city.”

A month ago, the city’s cabinet instructed the Addis Abeba Land Development & Management Bureau to adjust.