The Addis Ababa City Administration to introduce a new housing development scheme

One of the biggest challenges the residents of Addis Ababa are constantly grappling with is the lack of adequate and quality housing at affordable rental prices. A large majority of the residents are not home owners; hence they have to lease houses or apartments in Addis Ababa either from the government or private individuals/real estate developers. While rental prices of housing options provided by the government are reasonable, they are in short supply and only the lucky ones get the chance to rent such houses in Addis Ababa. Plus, mismanagement and corruption surrounding the government’s housing pool make it impossible for ordinary people to get a chance to lease such properties in Addis Ababa. The dramatic escalation on rental prices of privately owned apartments and houses for rent in Addis Ababa is pushing people to the brink. In order to alleviate this problem, the City Administration has decided to introduce new housing development schemes that will make it possible for the private sector to play a more active role. One of these schemes is a joint venture arrangement between the city administration and private developers, where the City Administration allots land to the developers as an equity contribution and jointly engage in housing development projects.

The question is that will the new land allocation scheme introduced by the Addis Ababa City Administration make it any easier for people to find houses or apartments for rent in Addis Ababa? What are the chances that this scheme will not be as disappointing as the condominium development scheme, which managed to build and handover to end users less than 400,000 units since it was launched in the last millennium? According to The Ethiopian Reporter, the Addis Ababa City Administration will soon start allotting land for developers in exchange of 30% stake in proposed development projects. This scheme was applied when Emaar/Eagle Hills, a Middle Eastern developer, was granted a huge piece of land at La Gare to undertake the biggest real estate project in Addis Ababa to date. The project will comprise of five star hotels, high end apartments, world class malls as well as office buildings along with the necessary amenities. It remains to be seen if this scheme will live up to the expectations of the Ethiopian government and the citizens of the country but the Addis Ababa City Administration is set to open up similar opportunities to more developers, both local and international.

According to this scheme, which came into being following series of discussions between the City Administration and local real estate developers, the City Administration will grant land to competent developers with proven track record. The city administration will own 30% stake, while the ownership of the remaining 70% will be under the respective developer. The city administration has agreed to avail land and prepare a working legal framework, while the private developers will be responsible for financing the project and carrying out the construction. The city administration will also expect the developers to apply new and more advanced construction technologies to construct the units in order to make sure the projects get completed within 6 to 24 months timeframe. The city administration hopes that the joint venture arrangement will enable it to transfer 30 percent of the units developed in collaboration with real estate companies to residents in the low-income bracket. The real estate developers are allowed to transfer their shares to any potential buyer on the market price.

According industry experts, the Addis Ababa City Administration has no choice but to make this scheme as successful as it can be since its condominium development scheme has been a total disaster. The City Administration has accumulated a debt in excess of 54 Billion Birr, which will make it nearly impossible for the administration to secure more financing to continue with the condo development projects. Even if financing was no longer an issue, the administration’s poor project management capacity and corruption will continue to be serious problems and resurrecting this scheme will take nothing less than a miracle. The question is that will the new scheme play a significant role in addressing the housing crisis in Addis Ababa? Considering the age old inefficiencies and bureaucracy as well as the current political situation in the country, the chances of this scheme hitting the ground running is very unlikely. For this reason, say industry experts, “it may take at least two to five years before we can see anything happening on the ground.” While this scheme may help alleviate the housing challenges in the long-run, it is not likely that it will produce any tangible result in the next few years. For this reason, renting apartments in Addis Ababa or leasing houses in the Ethiopian capital will definitely continue to be a challenge at least in the short-term.

This article first appeared on https://www.ethiopianproperties.com/