
My Opinion | 129747 Views | Aug 14,2021
May 27 , 2025.
Federal legislators are considering a bill that would allow foreign nationals to lease land and own residential properties, while prohibiting them from borrowing money or raising capital from local banks. The draft law, tabled to the Standing Committee on Urban Infrastructure & Transport Affairs, seeks to attract foreign direct investment (FDI) through real estate, but it imposes a strict requirement of a minimum investment and explicitly bars foreign investors from accessing domestic financing.
The government's chief whip, Tesfaye Beljige (PhD), asserted that the bill aspires to address housing shortages and attract foreign capital "without infringing on citizens’ land rights." Yet, the draft has ignited intense debates among lawmakers, bankers, and economists with divergent views about its potential impact.
However, the bill explicitly prohibits foreign ownership of property in government-funded public housing projects. However, this restriction does not apply to housing developed through public-private partnerships or profit-oriented residential developments built by the government or private sector. Foreign nationals are limited to owning a maximum of five immovable properties at once. All transactions involving leases, property acquisitions, construction permits, and government fees should be executed in recognised foreign currencies.
Legislators have sharply criticised the draft legislation, particularly the blanket prohibition on borrowing from domestic financial institutions. One legislator argued that allowing foreigners to borrow in foreign currency could help ease the persistent shortage of foreign exchange.
"Why not authorise them to borrow and repay in dollars?" he asked, arguing that this would potentially benefit local banks facing currency shortages.
MP Fethi Mehdi (PhD) echoed these concerns but offered a nuanced approach. He recommended permitting foreign investors limited access to domestic financing to expand their businesses once established. He argued for a flexible minimum investment threshold, adjusted according to regional economic conditions. Without this adaptability, he warned, foreign investors would favour Addis Abeba, neglecting other regions and exacerbating regional economic disparities.
The legislator proposed lower investment benchmarks for regions actively seeking external investment, a measure he believed would encourage broader economic growth nationwide.
Financial industry representatives offered diverse views on the bill’s economic implications.
Demissew Kassa, secretary general of the Ethiopian Bankers Association, broadly supported the legislation.
"The government prepared the bill to attract foreign direct investment," said Demissew. "The foreign nationals who want to lease land and own residential property should come up with their dollars."
He praised the bill’s overall approach but criticised the notion that investors might rely entirely on domestic banks without contributing their own capital. According to him, even if banks do not lend directly to foreign nationals, the dollars invested would still flow through the banking system, indirectly benefiting domestic financial institutions.
Others cautioned that an outright prohibition could negatively impact the banking industry.
Tadesse Hatiya, president of Sidama Bank, offered a balanced perspective, acknowledging both the merits and potential pitfalls of prohibiting foreign nationals from borrowing locally. He recognised that the bill is designed primarily to attract foreign investment by requiring investors to bring foreign currency. Tadesse proposed a compromise, allowing investors to finance up to half of their ventures through domestic loans.
"If investors are allowed to contribute at least 50pc of the required capital and secure the rest through domestic borrowing, it would not only incentivise foreign investment through favourable credit terms but also enable banks to benefit from increased lending activity," he told Fortune.
Dawit Keno, acting president of Hijira Bank, believes regulatory constraints currently restrict banks from lending in foreign currency. Unless the National Bank of Ethiopia (NBE) lifts these restrictions, allowing foreign nationals to borrow domestically remains impractical. Dawit advocated prioritising the broader national interest over individual banks, claiming that passing the bill in its current form would likely enhance Ethiopia’s attractiveness to international investors.
Economists like Naser Yenus (PhD), affiliated with the Ethiopian Economic Association, strongly oppose the prospect of foreign nationals borrowing from domestic banks. He argued that the legislation rightly mandates foreign investors to bring their own capital, preserving domestic financing opportunities for local entrepreneurs.
"We should prioritise local investors who are already seeking loans," said Naser.
The draft legislation has raised serious social implications among legislators. Opposition MP Desalegn Chane (PhD) warned that allowing foreign nationals access to property could disadvantage local populations, especially lower-income urban residents. Desalegn argued that the bill could potentially escalate housing prices, displacing residents and transforming urban centres into exclusive enclaves for wealthy foreign nationals.
"Once enacted, the law could displace low-income urban residents," Desalegn cautioned Parliament. "It could turn cities into a place solely for foreign investors."
His colleague, opposition MP Abebaw Desalew (PhD), raised constitutional concerns, arguing that Article 40 explicitly prohibits the sale or transfer of land ownership.
"Now we're endorsing making the land the property of foreign nationals, suggesting it belongs to individuals and can be sold and transferred," Abebaw said. "This is against the Constitution."
Naser, the economist, shared similar concerns about potential displacement and urban exclusivity, warning that foreign investment concentrated in prime urban areas could drive up housing prices substantially. Naser recommended government incentives encouraging investors to focus on housing developments for middle- and lower-income communities to respond to such risks.
Financial expert Ameha Tefera (PhD) also echoed these concerns, particularly for domestic real estate developers. Ameha cautioned that the bill poses a substantial threat by potentially allowing foreign nationals to dominate the real estate market. He argued the government should prioritise legislative support for domestic developers instead. Ameha warned of the risk of capital flight, as profits generated locally by foreign investors could ultimately be transferred abroad, undermining the broader economic interests.
The draft proclamation outlines several specific eligibility criteria for foreign nationals interested in investing in the property market. Potential investors should provide comprehensive legal documentation and demonstrate adequate financial capacity to meet a 150,000-dollar minimum investment threshold. Applications for permits should be submitted to the Ministry of Urban Development & Infrastructure, which has a two-week mandated decision-making period.
The contentious draft legislation has been referred to the Standing Committee on Urban Infrastructure & Transport Affairs for further scrutiny, with the Law & Justice Standing Committee co-chairing the review process. Despite the referral, three MPs objected to this process, pressing for more comprehensive legislative oversight and debate before the draft could proceed for ratification.
PUBLISHED ON
May 27,2025 [ VOL
26 , NO
1309]
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