Business Lawmakers ratify overdue real estate bill, set standards for broker licensing
By Elias Tegegn
December 7, 2024
Nearly a decade after it was first proposed, Parliament has ratified the country’s first Real Estate Development Proclamation, setting educational and ethical standards for independent brokers and property managers.
The Ministry of Urban and Infrastructure Development is set to establish national standards for the registration and licensing of real estate developers, agents, liaison brokers, and property valuators. Its officials will also be in charge of monitoring compliance and enforcing penalties, including the revocation of licenses, after the standards are set.
The absence of clear laws has led to disputes and widespread issues in the real estate industry, including disputes over property rights, inconsistent valuation practices, and inadequate consumer protection.
The experts behind the new bill expect it to provide a robust foundation for regulating these critical areas, ensuring that both developers and consumers are better protected in their dealings.
The legislation will enable property owners to comprehend the true value of their properties, which will make it easier for them to participate in capital markets. Officials also hope to see the bill promote urban growth through the standard application of valuation and property tax estimates.
Experts have raised concerns about the omission of a regulatory framework for developers managing projects with fewer than 50 units. Previous drafts of the bill had included provisions aimed at addressing the unique challenges faced by smaller developers, but these are notably absent in the current iteration.
Experts warn that another important aspect to consider is the matter of fairness in contracts between sellers and buyers regarding pre-sale agreements. While the law seeks to tackle contractual terms, it does not clearly define the nature of real estate contracts. Experts point out that lawmakers have not sufficiently dealt with the practical difficulties involved in classifying pre-sale agreements as either construction contracts or sales of immovable property.
According to the ratified proclamation, a unit can only be sold once it is 80 percent completed. Transfer of ownership below this threshold is prohibited unless there is mutual agreement between the buyers and the developer.
Additionally, upon reaching the 80 percent completion mark, the developer is entitled to request a title deed from the appropriate government authority.
The bill permits both local and foreign investors to participate in the Ethiopian real estate business. To qualify, they must obtain a real estate developer’s qualification license from the federal, state, or city-level urban and infrastructure authority. Additionally, both local and foreign investors are required to develop a minimum of 50 units per project.
Developers must provide essential documents, including building descriptions, architectural designs, title deeds, and any other relevant construction documents. They must also issue receipts for payments received from buyers.
The legislation prohibits developers from engaging in false advertising and from collecting payments or registering properties before obtaining land ownership and building permits.
Parliament ratified the Real Estate Development and Immovable Property Marketing and Valuation Proclamation by majority vote, with two objections and one abstention this week.