The Ups, Downs in Land Value

Land distribution always ranks high on the development agenda and takes on even greater proportions in the capital city where scarcity and location drive prices. SOLIANA ALEMAYEHU, FORTUNE STAFF WRITER reviews the results of monthly land auctions and shares findings, not only about the bidding process but also about the areas where land can be leased at the highest and lowest prices.

Land transactions worth over four billion Birr have taken place in the lease of 759 plots of land in land distribution in Addis Abeba, although the city government has not actually collect all that revenue.

In the last fiscal year, however the land development bank and transfer office in collaboration with its branches in the districts, has collected a revenue amounting to 1.6 billion birr in lease and related.

Advance payments stand at 10pc and 20pc for commercial and mixed use purposes, although bidders could make higher offers for competitiveness. The rest of the money is payable annually over 40 years for residential use and 30 years for other categories.

The monthly auctions emanate from the intention of the city government to stabilize prices in a market where the demand is high, according to Markos Alemayehu, process owner of Communication Affairs at the Land Development & Management Bureau.

The highest bid was made for a plot behind Yirga Haile Commercial Center in Merkato last August, when Siket International offered 355,555 Br per square metre for a 242sqm plot, totalling 86 million Br.

This plot is located in the Addis Ketema district, home to one of the largest open markets on the continent, and also one of the more densely populated areas of the city. Plots in this area have so far been unmatched in the high bid offers they commanded, particularly during the 11th, 12th, and 15th rounds.

At the other end of the spectrum, in the second special round of auctions, consisting of plots of larger acreage meant for real estate or business, a site in Bole was sold for 315 Br a square metre. While this figure may not be as low as the rates of 250 Br offered in the third round back in early 2013, it is very low in comparison to other real estate acquisitions such as that won by WAM Development Group at a rate of 31,110 Br per square metre in January, 2014.

But these cases are extremes. Other purchases are neither as extravagant nor as inexpensive. Average prices within each district vary from 8,700 Br in Akaki Kality to 16,750 Br in Kolfe Keranyo.

The district of Kolfe Keranyo recorded the lowest average price in land auctions in January, 2014. Since then, however, the hierarchy has been reshuffled to place the district in second place for the most expensive property up for auction.

Outside Addis Ketema, the highest offer for a plot of land was made for 173sqm in the Kolfe Keranio District. Hussein Dawud offered 48,925 Br for a square metre of land for residential purposes, a total of 8.46 million Br. The runner up for this bid, Zewdu Liyew, had offered only a third of this amount.

Hussein will be expected to pay 10pc in advance, which is 846,000 Br, with the rest to be paid in 40 years, although the lease period is 99 years.

Nifas Silk is another top earner, with the highest offers in the rounds in which it has participated, coming from the district. In the 14th round, it had recorded the highest rates, 36,500Br, while in the current auction, it scored 33,700Br per square metre. Previous auctions also place Nifas Silk in one of the top tiers.

Kolfe Keranyo and Nifas Silk districts have consistently high prices because of their location, Markos explained to Fortune. Neighbourhoods like Bethel, where a lot of these plots are located, are close to the city centre and located in an urbanized area. Buyers therefore count on an already established market, well built infrastructure, and minimised transport costs when offering a bid for these areas.

Addis Ketema, in addition to being in the city centre, is advantageous because of its being the most established commercial district. Prices are also driven by the scarcity of land and rarity of the auctions.

Conversely, districts on the periphery of the city, do not offer as many benefits. Infrastructure and markets are yet to be established and transportation costs are high.

Subsequently, Akaki Kality has recorded the lowest average rates in all the rounds. It is also the only district that has consistently put land up for auction. In the last five rounds alone, over a hundred thousand square metres have been leased everywhere for sums ranging from 2,555 Br to 16,100 Br per square metre.

The district of Bole, on the other hand, though having started as one of the most expensive districts, is now the third cheapest district in which to lease land, coming in after Gulele and Akaki. The precedent Bole had set in the first and second rounds as the most expensive place has dwindled, as the prime locations have already been leased, and available plots are getting closer and closer to the edges of the city.

For a down payment of 10pc, someone can own a residential plot of land for 99 years, as long as the annual installments are met and completed within 40 years.

Hence, Genet Chekol won the bid for a 189sqm plot of land in Akaki-Kality for the price of 12,100 Br a square metre, with a total cost of a little over two million Birr, but her agreement requires her to pay only 230,000 Br in advance, and an annual sum of 51,000 Br for 40 years. Once the down payment is handled, the plot is hers if she can put aside 4,300 Br every month.

But bids are not always so high in this district. Amanuel Kassaye won 673sqm of residential land at 2,555Br per square metre. After a down payment of 21pc, which he voluntarily increased from the minimum requirement of 10pc, retaining the land for 99 years will cost him 2,800 Br per month.

In order to alleviate the demand in city centre areas, a rehabilitation programme is in the works, Markos told Fortune. Tens of hectares around American Gibi, Teklehaymanot, Autobis Terra, and behind Wabe Shebelle Hotel in the Mexico area, are in the process being cleared up for more leases, he says.


Published on Nov 16,2015 [ Vol 16 ,No 811]



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