Parliament to Review New Urban Land Leasing Decree Allowing Negotiations











A bill allowing the transfer of urban land through lease will be submitted to Parliament.

In addition to auctions and allocations of urban land, a draft decree will be submitted to Parliament to permit the transfer of urban land through negotiations and leases. This new decree mandates that at least 20% of the land cities prepare for allotment should be used for housing construction.

This proclamation, to be issued on “Leasing of Urban Land,” is scheduled for presentation at the House of Representatives’ regular meeting on Tuesday, October 19, 2017. The new law, replacing the “Declaration on Occupying Urban Space” approved in 2004, is organized into six sections and 49 paragraphs.

The first part of the draft decree covers general provisions, while the second part outlines basic lease provisions. The third part details the implementation of urban land lease auctions.

Section IV of the decree sets out provisions on urban land allocation and negotiations, specifying the conditions under which leases are permitted. The fifth part addresses the management of urban land leases, and the final part includes various provisions, including penalties.

The new decree has been prepared in response to the country’s rapid economic growth, which has increased demand for urban land. It aims to establish a land supply and management system that meets this demand effectively. The document states that additional provisions are necessary to improve the lease system and address legal gaps in the current law.

A notable addition to the draft decree is the provision allowing land transfer through negotiation and lease. The existing proclamation, now thirteen years old, only permits leasing urban space through auctions or allocations. The new “negotiation” provision enables developers to lease urban land for “services of special national interest” when it cannot be transferred by auction or allotment.

This is implemented by the “relevant body” in negotiation with developers, based on the development plan, as explained in the interpretive section of the decree. The document also notes that urban land may be transferred through negotiations following the “National and Regional Urban Development Spatial Plan.”

For development requests from the government and private sector, the new decree allows land transfer through negotiations. The draft decree specifies that urban land may be transferred through negotiations for projects such as federally managed industrial parks, industrial development, higher education and health institutions, and research sectors.

The decree states that land requests for star hotels supporting the service sector and tourist resorts may also be handled through negotiations. Urban redevelopment projects developed by the private sector or in public-private partnerships will follow the same land allocation method.

Land requests for real estate or housing development, large shopping malls, fuel tanks, distribution centers, and modern parking structures may also be obtained through negotiation, as indicated in the new decree.

Negotiable projects are assessed on “the content, scope, and depth of future development; the accommodation and benefit of existing beneficiaries in the development area; benefit and harm reduction for surrounding communities; and the extent of infrastructure provision,” as specified in the draft decree.

The transfer of urban land through negotiations in regions, Addis Ababa, and Dredawa administrations will require cabinet approval. The decree also stipulates that the negotiable transfer price of land should not be below the area’s average lease price.

Provisions from the existing proclamation on urban land allocation are partially included in the draft bill submitted to Parliament. However, the new decree introduces a provision for the “land supply situation for housing construction.”

This provision mandates that “at least 20%” of land set aside for housing in cities must be used for this purpose. An individual who benefits from a housing cooperative, joint housing development program, or individual urban land allotment cannot benefit from another allocation within the same city.

The new decree also amends requirements for individuals who win land auctions. In the current Lease Proclamation, the winning bidder is determined by the highest bid price and advance payment.

This is revised in the draft decree, where lease bid winners are identified based on the bid price, down payment, and lease payment calculated over the lease term. According to the new decree, the final score will consist of 65% of the auction price, 20% of the advance payment, and 15% of the lease payment.

The new decree also extends the review period for the base lease price from two years to three years. The “Lease Base Price” is defined as the minimum land cost, considering infrastructure costs, removal of existing structures, developer compensation, and other relevant requirements.

In the transitional provision section, the ordinance specifies that urban land requests submitted to the appropriate body before the decree’s enactment will remain valid for up to six months from the decree’s effective date. The document states that decisions will be based on the existing decree and any rules and regulations issued under it.