Land Lease Policy in Addis Ababa

140 Pages·2009·2.28 MB·English

LAND LEASE POLICY IN
ADDIS ABABA
Research Team
Dr. Bacry Yusuf, Development Economics, American World
University, USA
Mr. Sileshi Tefera, Msc. Geography, University of Wisconsin,
Madison, USA
Mr. Admit Zerihun, Msc. Economics, Addis Ababa University
Produced and distributed by
the Addis Ababa Chamber of Commerce and
Sectoral Associations with �inancial support from
the Swedish Agency for
International Development Cooperation, Sida
Sida
© Private Sector Development Hub/Addis Ababa Chamber of Commerce and
Sectoral Associations, 2009
P. O. Box 2458, Mexico Square, Addis Ababa, Ethiopia
Tel: [phone]/ 542405, Fax: [phone],
Email: [email protected]
All Rights Reserved.
No part of the publication may be produced or transmitted in any form or by any means
without the prior permission of the copyright holder. The only exception is for a reviewer,
who may quote short excerpts in a review.
Disclaimer:- The views expressed in the study do not necessarily reflect the views of PSD-
Hub or Addis Ababa Chamber of Commerce and Sectoral Associations or Sida. They are
solely the responsibilities of the authors.
CCoonntteennttss
CHAPTER ONE
INTRODUCTION............................................................................... 5
CHAPTER TWO
LAND AND URBAN LAND SYSTEMS......................................................... 9
2.1 Special Features of Land........................................................... 9
2.2 Types of Urban Land Tenure Systems ............................................ 11
2.3 Urban Land and Physical Planning................................................ 12
2.4 Policy Issues to be Resolved....................................................... 13
2.5 Socio-economic Signifi cance of Land in Ethiopia............................... 14
CHAPTER THREE
COUNTRY EXPERIENCE IN LAND AND LAND MANAGEMENT............................. 17
3.1 Introduction.......................................................................... 17
3.2 Country Experience................................................................. 18
3.3 Myths and Realities of Public Land Leasing: A Comparative
Survey of Two Cities (Canberra and Hong Kong)............................... 33
3.4 Lessons .............................................................................. 36
CHAPTER FOUR
DIALOGUE, PARTNERSHIP AND LAND POLICY........................................... 37
4.1 Background.......................................................................... 37
4.2 Public-Private Consultation and Dialogue....................................... 37
4.3 The Signifi cance of Public-Private Partnership................................. 40
4.4 The Ethiopian Experience in Dialogue and Partnership....................... 43
CHAPTER FIVE
LAND ADMINISTRATION IN ADDIS ABABA:HISTORY AND ASSESSMENT................. 47
5.1 Policy Instruments and Legal Framework....................................... 47
5.2 The History of Urban Planning in Addis Ababa ................................. 51
5.3 Land Registry......................................................................... 53
5.4 Geographic Information of Parcels............................................... 55
5.5 Land Valuation....................................................................... 58
5.6 Land Taxation........................................................................ 61
CHAPTER SIX
URBAN LAND MANAGEMENT SYSTEM IN ADDIS ABABA.................................... 63
6.1 Review of Implementation Mechanisms and Procedures........................ 63
6.2 Procedures and Circumstances of Urban Land Acquisition: Potential
Channels for Accessing Land........................................................ 63
6.3 Administrative Capacity of the Implementing Body............................. 66
6.4 Assessment of Land Delivery System............................................... 69
CHAPTER SEVEN
DEMAND, SUPPLY OF LAND AND PRICING
IN THE CAPITAL CITY ........................................................................ 73
7.1 Land Markets.......................................................................... 73
7.2 Significance of Demand Factors for Urban Land in the Ethiopian
Context................................................................................ 75
7.3 Factors Influencing the Supply of Urban Land................................... 86
7.4 Land Availability/Supply by Type of Landholding, End
Users and Others..................................................................... 90
7.5 Unmet Gap in the Current Addis Ababa Setting................................. 95
7.6 The Process of Price Fixing ........................................................ 99
7.7 Trends in Urban Land Prices ....................................................... 107
7.8 Land Markets in Economic Growth................................................ 110
7.9 Impact of Lease Price on Business Development and
Economic Growth ................................................................... 110
CHAPTER EIGHT
APPROACHES TO IMPROVED MECHANISMS OF URBAN LAND DELIVERY ............... 115
CHAPTER NINE
CONCLUSIONS AND RECOMMENDATIONS.................................................. 121
9.1 Conclusions............................................................................ 121
9.2 Recommendations.................................................................... 126
REFERENCES................................................................................... 135
List of Tables
Table 1 Unutilized land available for different uses................................ 57
Table 2 Comparison of house valuation by banks vis-à-vis
city administration............................................................. 60
Table 3 Names of sub-cities (Kifl e Ketema) and number of
kebeles by sub-city............................................................. 68
Table 4 House-related transactions registered by the Act and
Civil Status Documents Services of Addis Ababa, 1999-2005.............. 70
Table 5 Real estate renting and business activities
(Hamle 1984- Sene 1998 E. C.)................................................ 80
Table 6 Plots made available through lottery........................................ 90
Table 7 Number and size of plots allotted for residential use (hectares)....... 92
Table 8 Number and size of plots allotted for real estate......................... 94
Table 9 Floor price of urban land in Addis Ababa by area and
Grades-Birr/ square meter.................................................... 103
Table 10 Relation between lease price and land grade/area....................... 103
Table 11 Coeffi cient of variation......................................................... 104
Table 12 Summary statistics of plots of land delivered by sub-city................ 105
Table 13 Land acquisition by type and prices in Birr/square meter................ 107
Table 14 Urban land lease by end-use and prices in Birr/ square meter........... 108
Table 15 Land as percent of total investment......................................... 113
Table 16 Land as percent of real estate investment: Luxury homes.............. 113
List of Figures
Figure 1 Number of plots allotted for real estate from 1995-2006................. 95
Figure 2 Average price in Birr per square meter by sub-city ........................105
Figure 3 Price distribution of plots sold in percentage...............................109
Figure 4 Cumulative price distribution of plots sold .................................109
Figure 5 Average unit price of plots (Birr per square meter)
by activity........................................................................ 112
Acronyms and abbreviations

ACT .................Australian Capital Territory
CBD..................Central Business District
CBOs.................Community-based Organizations
CSA ..................Central Statistical Agency
CSOs.................Civil Society Organizations
CSRP.................Civil Service Reform Program
LIS...................Land Information Systems
LDPs.................Local Development Plans
NGOs................Non-governmental Organizations
ORAAMP.............Offi ce of the Revision of the Addis Ababa Master Plan
PDPs.................Participatory Development Programs
RFPs.................Request for Proposals
SEDZ.................Special Economic Development Zones
SMEs.................Small-scale and Micro Enterprises
UDAs.................Urban Development Authorities
USD..................United States Dollar
UNHs/Habitat......United Nations Center for Human Settlements
CHAPTER ONE
INTRODUCTION
Several characteristics distinguish land and land markets. Land is a factor of
production essential to the provision of urban housing services and the production
of agricultural goods. It is also demanded as a fi nancial asset since it is oft en a good
hedge against infl ation, especially in countries where fi nancial markets are not well-
developed. Th e acquisition of land is frequently part of the portfolio diversifi cation
strategies of economic agents even in economies with well-developed fi nancial
markets and where infl ation is not a serious problem. Financial institutions frequently
prefer land as collateral for credit operations in many developing countries because
land is immobile, its depreciation small, and its value not eroded by infl ation. Land
is a heterogeneous good whose market prices usually refl ect not only its value but
also location and att ached investment.
Insofar as land is a factor of production and a store of wealth, it is also a source of
political power, especially in societies where access to other assets is limited. Th e
evolution of property rights shows that landowners have had upper hand in shaping
policies that favor their interests, a situation that is still prevalent in some industrial
and many developing countries.
Th e demand for land stock derives fi rst from the need for agricultural goods and
housing, which is essentially a demand for land services. Secondly, it arises from
5
the desire for infrastructure and environment-related projects, a demand oft en
independent of land prices as it is determined by government objectives and other
A
B
concerns. Th irdly, it takes the form of an asset demand in view of the fi nancial asset A
B
characteristics of the land stock. Th e role of land as a hedge against infl ation, as A
S
collateral for credit operations, and as a component of the diversifi cation strategies DI
D
of economic agent is subsumed in this third type of demand. Th e supply of land for A
N
the rural and urban sectors is determined by nature – availability, topography, soil
Y I
fertility – and by the volume and quality of prior investments, including structures. C
LI
Regulatory constraints aff ect both the demand and supply of land. O
P
E
S
A
Th e emergence of land markets is closely related to the evolution of property rights
E
L
over land. In the urban context, the appearance of permanent and more secure D
N
A
L
LAND LEASE POLICY IN
ADDIS ABABA
walled sett lements that allow dwellers to reap economies of agglomeration created
the need to defi ne property rights over tracts of land (and the structures on them).
Th e limited space within a walled city created scarcity of land – the prerequisite for
the constitution of a market for land.
Studies suggest that land and real estate assets account for 45 to 75 percent of wealth
in developing countries, thus playing a unique dual role of serving as inputs into
production activities in agriculture, industry, and services as well as consumption
by households and commercial entities of residential and commercial real estate
and infrastructural services.
Similarly, land is a key component in the real estate development sector of Ethiopia.
Real estate is generally defi ned as “land and anything permanently affi xed to the
land”. In common usage the term oft en relates to urban real estate and excludes
agricultural land. Real estate activities belong to the service sector and are distinct
from construction activities. In this context, urban land administration and land
markets become key factors in contributing to increased investment or effi ciency of
production, hence increasing incomes or discouraging investment and production
effi ciency.
Th e real estate sector and land have therefore fundamental signifi cance to both
businesses and individuals. To the former, real estate constitutes one of the basic
conditions for running a business while in the case of the latt er it constitutes an
important social policy consideration as it relates to the provision of the basic needs
of housing.
A dynamic real estate sector further boosts demand for goods and services from a
range of sectors, including building materials and construction industries. As a key
component of the national economy, the real estate sector exists in the form of several
6
distinct businesses, each of which may be considered as an industry of its own right
with distinct economic logic and fundamental att ractiveness. Hence understanding
A
B
A the att ractiveness of each of the range of industries and their susceptibility to change
B
A over time becomes a primary concern.
S
DI
D
A Land is under public ownership in Ethiopia. Th is policy and the att endant land
N administration practices have drawn impassioned debates over the years, to
Y I
C the extent of holding it responsible for all failures in the overall socio-economic
LI
O development of urban centers.
P
E
S
A Based on the above conceptual framework and the analysis of the legal, institutional
E
L
D and administrative arrangements, this study aims at evaluating the performance of
N
A
L
LAND LEASE POLICY IN
ADDIS ABABA
the urban land management system and identifying issues and problems underlying
the gap between supply and demand.
It further examines alternative policy, legislative, institutional and implementation
mechanisms, and makes recommendations deduced from a thorough analysis of
issues and problems which may have a bearing on the encouragement and facilitation
of investment through easy access to land at reasonable time and cost.
In the elaboration and analysis of the current urban land policy in Addis Ababa
and the att endant issues, the conduct of work was based on an interactive approach
among all concerned. In doing so, review and analysis have been made on:
• Th e link between land policy and development;
• Th e experiences of other countries and cities to see if Ethiopia’s experience is
consistent with conditions in developing and developed countries;
• Policy statements and major development programs of the government
on land related matt ers with a view to analyzing and understanding their
implications on land administration systems; and
• Price sett ing mechanism to see whether it matches with theoretical framework
and country objectives.
7
A
B
A
B
A
S
DI
D
A
N
Y I
C
LI
O
P
E
S
A
E
L
D
N
A
L