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Fortune News | Nov 09,2019
The long-awaited land auction in Addis Abeba drew hundreds of developers eager to secure prime plots across the city, marking an event in the capital's urban development evolution. Over nine days last week, the auction presented a market for developers to bid on 22 plots in the recently demolished Piassa area in the Arada District. A total of 295 bidders vied for these "blank canvas" locations, but 40 bids were disqualified for not meeting the requirements, and two plots were withdrawn due to insufficient interest.
The Addis Abeba City Administration floated these plots, with over 90pc concentrated in four major districts.
Nifas Silk Lafto emerged as the most dominant, accounting for 53pc auctioned plots. Other allocations included Akaki Qaliti with 18pc, Kolfe Qeranyo at 10pc, and Addis Ketema at nine percent. The remaining 10pc of the plots were distributed among districts such as Qirkos and Arada. The plot areas varied significantly, with Nifas Silk Lafto offering between 373Sqm and 14,081Sqm.
The auction coincided with the City Administration's ambitious 48Km corridor development project, which expects to create new plots from recently cleared areas and further reshape the city. The initiative has generated considerable buzz, particularly in zones designated for new projects, including areas near the newly inaugurated Adwa ZeroKM Museum, Doro Maneqia, Mohammud Muziqa Bet, Eri Bekentu, and Qey Bahir Condominium.
According to an analysis conducted by the Urban Centre, an initiative of Yema Architecture, a consulting firm based in Addis Ababa, the auctions' financial impact is expected to be profound. Incorporated in 2007, YEMA initiated its Urban Centre project as an offshoot of a popular radio show, "Kebet Eske Ketema," hosted by Mahider G. Medhin.
The relationship between lease income, bidders' capital, and plot area range vividly depicts the auction's revenue potential. A pronounced spike in lease income correlates with higher land grade values. The city administration's decision to require bidders to provide 40pc of their bid as an initial deposit, with the remaining balance payable over five years, marks a shift from previous practices. The city authorities hope to streamline payments and enhance liquidity, moving away from the former 20-year payment period with extensions.
The city administration projects a substantial lease income of 140.4 billion Br over five years, with an initial revenue of 56.2 billion Br, constituting 40pc.
The geographical distribution of the plots shows a focus on neighbourhoods with substantial growth potential. Nifas Silk Lafto, with the highest plot allocation, stands out as a critical zone for future urban development, bolstered by its high land value and extensive plot areas. In contrast, areas like Gulele and Qirkos, with lower benchmark prices and fewer plots, might experience a slower growth trajectory.
Although individual bidders participated in last week's auction, established companies emerged as the dominant force to reckon with. Banks, insurance firms, and real estate giants fiercely competed for the most coveted plots. In one particular area near Shewa Hotel, adjacent to Teklehaimanot General Hospital, a record-breaking offer of 350,000 Br for a square metre was offered. Awash Bank secured a 977Sqm plot with an upfront payment of 311,000 Br for a square metre for a 60-year lease, outbidding an individual bidder, Habib Yusuf.
Tilahun Geleta, senior finance and facility manager at Awash Bank, expressed delight over securing the plot.
"We've already included it in our budget," he told Fortune.
The Bank plans to move its branch to the new five-story location a few hundred meters away.
The auction leveraged technology to facilitate the bidding process, making 4,200 documents for 242 plots available online and using Tele Birr, a mobile payment platform, to reduce crowds at the Land Development Bureau on Equatorial Guinea St., near the Lem Hotel area.
Ethio Reinsurance (EthioRe), the country's pioneer reinsurance firm, secured a 1,585Sqm plot near Qey Bahir Condominium with an offer of 102,213 Br for a square metre and a pledge to pay the total amount upfront. EthioRe outbid Samson Properties Plc for a square metre plot by 2,113 Br. Fikru Tsegaye, business and strategic planning executive at EthioRe, revealed plans to build EthioRe's headquarters on the site, incorporating a training centre for reinsurance companies.
"We're thrilled to be close to the capital's grand projects," Fikru told Fortune.
City regulations for Arada District plots mandate a mixed-use structure with a maximum elevation of five stories.
Chale Abraham, head of land transfers at the Bureau, attributed the lower bids in some areas to the height limitations. He assured that new tenders for the withdrawn plots would be announced soon, following a digital format.
"Bidders are always calculating potential returns," said Chale.
Despite the high offers this year, they fell short of last year's record. In 2023, a plot in Qirqos District's Sar Bet area reached a staggering 695,000 Br for a square metre. This year, the highest bid was less pronounced, with an individual bidder, Kokeb Teklay, securing a 2,064Sqm plot in the Doro Maneqia area at 70,900 Br for a square metre.
A shadow of accessibility hangs over these developments. A 13-year law governing leased land grants appropriations to specific entities like religious institutions and public offices. All other transfers must go through lease auctions, which can be out of reach for many ordinary citizens.
Researchers like Eyouel Tamrat (PhD) share this concern.
Eyouel argued that city administrations rely heavily on land lease revenues, leaving low—and middle-income families with limited investment options.
"There must be some way to accommodate the majority," Eyouel told Fortune.
He finds the increased emphasis on upfront payments in recent auctions as a positive development for competition. Previously, acquired properties often faced extended development cycles. However, Eyouel believes the relevant question is not how high the auction prices climb, but how much the resulting development benefits the city's infrastructure needs.
"Ensuring everyone in the city benefits from these high land auction proceedings is crucial," he said.
Several high offers came from individuals this year, including Mohammed Bedru's winning bid for 1,400Sqm plot at 213,000 Br with a 40pc advance payment, and Afnan Muktar's winning bid of 266,000 Br for 951 square metres.
A few real estate companies have also secured plots. Two Centre Real Estate made a winning offer of 264,000 Br for a square metre for a 1,384Sqm plot, while Al-Hiwan Real Estate won with a pledge to pay the total amount in advance for a 907Sqm plot at 121,513 Br. Another plot in Woreda 5, around the Doro Maneqia area, received only three bids. The reputed real estate developer, Varnero Construction Plc, secured a 1,293Sqm plot for 119,000 Br, offering to pay 40pc of the nearly 153 million Br in advance.
Quarit Agro-Industry Plc outbid eight others for a 723Sqm plot near where Awash Bank secured its, for 298,511 Br for a square metre, with a pledge to pay 51pc in advance—the 15-year-old food supplements company, based in Bahir Dar Town, Amhara Regional State. Major shareholder Habtamu Tadesse disclosed that the company plans to move the headquarters from the Arat Kilo neighbourhood, which lacks adequate parking, to the new plot while renting out space to other companies.
"We also expect additional income," Habtamu told Fortune.
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