A new bill aimed at regulating Ethiopia’s real estate sector has been submitted to the House of People’s Representatives for review. The legislation seeks to address longstanding issues within the industry, particularly concerning the pre-sale of homes and the collection of advance payments before construction has begun.
The proposed law introduces stricter guidelines for real estate developers, including the requirement to deposit advance payments collected from homebuyers into closed bank accounts. This measure ensures that funds are used solely for construction purposes and prevents the misuse of buyers’ money. Developers will only be allowed to withdraw funds according to regulations that will be established following the bill’s approval.
Additionally, the bill stipulates that real estate developers are prohibited from handing over homes that are less than 80% complete. Buyers must consent if they wish to accept homes before they reach this construction milestone.
Under the new framework, real estate developers will need to secure a “Qualification Permit” before entering the market. This requirement replaces the current practice where developers only needed a business license to operate. To obtain this permit, developers must have built and delivered at least 50 homes. Both domestic and foreign developers will also need to demonstrate sufficient financing for their projects.
Developers will no longer be allowed to register clients or collect advance payments unless they have obtained a land ownership certificate and a building permit from the relevant authorities. The bill ensures that the number of homes registered aligns with the legally acquired land capacity, preventing overselling.
The bill also outlines new opportunities for developers to acquire government land. Developers who meet certain conditions, such as providing 40% of their homes to low- and middle-income families, will be eligible for more expansive access to land. In Addis Ababa, developers who plan to build over 5,000 homes could benefit from this provision, while those in other cities must meet lower thresholds based on housing demand.
One of the bill’s primary goals is to protect homebuyers from the risks associated with early home sales. By enforcing the use of closed bank accounts and requiring significant construction progress before sales, the bill aims to reduce financial losses and harassment suffered by customers in the past.
The draft law also grants domestic investors certain privileges, such as allowing the advancement of early home sales under specific conditions, while foreign developers are expected to provide independent financing.
The bill has now been referred to the Standing Committee on Urban, Infrastructure, and Transport Affairs for further consideration.
If passed, this legislation is expected to bring much-needed reform to Ethiopia’s real estate sector by increasing accountability, protecting homebuyers, and regulating the financial and operational aspects of real estate development.
