Real estate developers who sell homes before construction begins must deposit the funds raised into a closed bank account. They are also prohibited from handing over homes to customers until construction is at least 80% complete.
Submission of bill to the House of Representatives
The bill was introduced in the House of Representatives today and details new regulations for Ethiopia’s real estate sector.
No advance payment without proper documentation
The bill prohibits real estate developers from registering customers and collecting advance payments unless they have a certificate of land ownership and a building permit for the home in question.
Introduction of “Certificate of Qualification”
The new bill would require developers to obtain a “qualification permit.” This applies to both domestic and foreign investors, who must build and supply at least 50 homes to qualify.
Funding sources needed for developers
Domestic and foreign developers must prove that they have the necessary “financial resources” for their projects. However, domestic investors are given permission to sell their homes early under certain conditions.
Regulation of presale finance
The bill addresses the common practice of developers signing contracts and accepting payment from buyers before construction begins. Developers who wish to raise funds in this way must obtain “permission from the relevant authorities.”
Bank account required for pre-sales
Developers using the presale method must keep the funds raised in a bank account, and there are strict regulations on withdrawals. The bill requires these funds to be deposited in a closed account opened with the permission of the relevant authorities.
Restrictions on transfer of real estate ownership
The developer “may not sell or transfer” proof of ownership until the home sold is constructed and delivered to the buyer.
Reducing harassment and customer loss
The bill aims to reduce harassment and financial harm to homebuyers by imposing mandatory procedures on developers who sell their homes early.
Prohibition on sales of houses with less than 80% completion rate
Developers are prohibited from selling homes that are less than 80% complete. In addition, unfinished houses can only be handed over to the customer with explicit consent.
Registration and payment collection period
Real estate developers can register home buyers and collect down payments only after receiving both a “land ownership certificate” and a “construction permit” from the relevant authorities.
Limit on number of registered buyers
Developers cannot register more home buyers than the legally acquired land can accommodate.
Access to federal lands for developers
The new Decree also outlines a process for developers to acquire large tracts of government land subject to certain conditions. This includes making 40 percent of housing available to low- and moderate-income people and building a large number of housing units, ranging from 500 to 5,000 units, depending on the city.
Additional terms and conditions for government land access
Developers benefit from these land access provisions if they import resources that are not available domestically in quality or quantity using their own foreign currency (Franco Valta) and reinvest the profits domestically for up to 10 years. That’s it.
Unanimously referred to committee
The bill, titled “Real Estate Development and Real Estate Marketing and Evaluation,” was submitted to the House of People’s House and referred to the Urban, Infrastructure and Transportation Committee for further consideration.
