The Federal Housing Corporation’s first increase in commercial rental fees in 43 years in Addis Abeba has caused significant tumult among the business class across the city.
In a letter addressed and sent to each tenant on December 18, 2018, the Corporation announced hikes in commercial unit rental fees by an average rate of between 521pc in Lancha to 6,784pc in neighborhood around Stadium. City wide, the commercial rental fees increased by an astounding average rate of 2,090pc.
With a contract renewal deadline set for December 24, the revision will come into effect in the first week of January 2019.
The revised rental fees are based on a thorough survey conducted on rental tenures of private properties in the city, according to the Corporation.
“The result of the survey demonstrated that rental prices of the Corporation are not up to current market prices by any standard,” said Kibrom Gebremedhin, director of communication affairs at the Corporation. “Considering the current market price of rent in the city, it could be said that our tenants were using the commercial units for free.”
The tenants though are complaining that the revision is unfair and shocking.
A 55-year-old owner of a small bar and tenant for a decade at Sierra Leone Street around Lancha, who preferred to stay anonymous, said that he feels as if he is in a nightmare since receiving the letter from the Corporation last Tuesday.
His monthly fee, for a property that has a medium-sized main room and four small service rooms in the back, which he won at an auction following the previous tenant’s contract termination, was 15,066 Br. The revision raises his rental fee by over three-fold to 50,776 Br.
“How can I continue with this business paying salaries for 17 employees in addition to supporting six family members,” he asked. “I could not cope with this cost unless I increase the prices of my services, which may lead to losing my regular customers.”
The revision has sent shockwaves to tenants in Piassa, Merkato, Bole and Mesqel Square.
Umer Mohamed, who owns an electronics shop close to the old post office in Piassa and has been paying 3,000 Br, has seen his rent go up to 17,000 Br a month.
“How they calculate the price revision is not clear and vague,” Umer told Fortune.
The new rental fee by the Corporation for an office on the ground floor around Stadium is calculated at 642 Br a square metre. This is compared to a privately-owned space in prime locations in the city such as the Stadium, Piassa and Bole where rents run between 350 and 500 Br a square metre, according to industry insiders.
The survey by the Corporation, which administers a total of 18,153 units in Addis Abeba and Dire Dawa, out of which 37pc are commercial properties. Currently, 65pc of the tenants have been paying between 65 Br and 95 Br a square metre for their units. There are 6,128 state owned commercial properties in Addis Abeba.
The tenants have started submitting grievances to the main office of the Corporation around Leghar and at their respective branch offices. They have also agreed to conduct a mass demonstration at the main office on Monday, December 24, 2018.
Their complaints include that the rental fee did not consider the age of the properties and that the revision was not made in a transparent process.
Begziabhere Alebel (PhD), an expert with more than a quarter of a century in the construction industry and housing, claims that the government should reconsider the rental costs based on the capacity of the tenants.
“The government should also have been transparent on the revised fee by clearly stipulating the methods used to calculate the rent for a square meter to not confuse the people,” he added.