Wednesday, July 24, 2024
BusinessCity Admin to allot land for developers in exchange for 30% stake

City Admin to allot land for developers in exchange for 30% stake

Real estate developers will soon begin to develop houses under a joint venture arrangement in partnership with the Addis Ababa City Administration.

The Administration will own a 30 percent stake, while the remaining will be under the ownership of the developers.

The new arrangement comes following a series of meetings between officials and managers of real estate companies. A consensus was reached between the two to implement a joint venture as a partnership modality.

Locals can benefit from the new arrangement but a study is underway to allow foreign developers to work under a similar scheme,  

It is a decision taken after the city administration faced a budget squeeze to construct housing units and satisfy the growing demand for houses in the capital city. Over a million residents in the capital have been waiting for over a decade to buy a low-cost housing unit from the city government.

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The Administration now owes over 54 billion birr to the Commercial Bank of Ethiopia (CBE). It borrowed the fund in the last decade to build houses for city dwellers, but failed to service the debt on time, eroding CBEs confidence to approve more loans for the Administration.

“The 70–30 arrangement is an average figure. Our share may increase or decrease depending on the location of the plot of the land,” said Paulos Tamrat, a director at the City’s Housing Development Office.

Tasked with leading the Housing Development projects of the Office, Paulos says the joint venture will be implemented under specific conditions. The city administration is required to avail land and prepare a legal framework, while private developers are obliged to finance the project and apply new construction technologies to construct the units, according to Paulos.

Real estate developers are required to deliver the projects within six months to two years, depending on the scope of the work. Officials want to launch the first phase of the project construction of 140 housing units within two months timeframe.

The joint venture enables the city administration to transfer 30 percent of the houses developed with real estate companies to residents under the low-income bracket. And Commercial banks are required to avail long-term finances for residents who get the houses.

Real estate developers can transfer their shares to a third party through sales based on the market price.

The new initiative is part of the government’s plan to enforce new modalities in the housing market. Last year, it gave a permit for OVID Construction to redevelop government-owned community houses without relocating tenants, who will be given a chance to own the units once the construction is completed.

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