Real estate developers who sell houses before construction begins must deposit the money they collect in a closed bank account. They are also prohibited from handing over houses to customers unless the construction is at least 80 percent complete.
Bill Submission to the House of Representatives
The bill was submitted to the House of Representatives today, detailing new regulations for the real estate sector in Ethiopia.
Prohibition on Advance Payments Without Proper Documentation
The bill prohibits real estate developers from registering clients and collecting advance payments unless they have obtained a land ownership certificate and a building permit for the house in question.
Introduction of a “Qualification Permit”
Under the new bill, developers will be required to obtain a “Qualification Permit.” This applies to both local and foreign investors, who must have built and supplied at least 50 houses in order to qualify.
Source of Financing Requirement for Developers
Developers, both domestic and foreign, are required to prove they have the necessary “source of financing” for their projects. However, domestic investors are granted permission to sell homes early under specific conditions.
Regulation of Pre-Sale Financing
The bill addresses the common practice of developers signing contracts and accepting payments from buyers before construction begins. Developers who wish to raise funds this way must obtain “permission from the relevant body.”
Mandatory Bank Accounts for Pre-Sales
Developers using the pre-sale method must keep collected funds in a bank account, with strict regulations on money withdrawals. The bill requires that these funds be deposited in a closed account, opened with permission from the relevant authority.
Restrictions on Property Ownership Transfer
Until a sold house is built and handed over to the buyer, proof of ownership “cannot be sold or transferred” by the developer.
Reduction of Harassment and Customer Losses
The bill is designed to reduce the harassment and financial losses suffered by homebuyers by imposing mandatory procedures on developers who sell houses early.
Prohibition on Selling Houses Less Than 80 Percent Complete
Developers are prohibited from selling houses that are less than 80 percent complete. Additionally, unfinished houses can only be transferred to customers with their explicit consent.
Registration and Payment Collection Timeframe
Real estate developers can only register homebuyers and collect advance payments after receiving both a “Land Ownership Certificate” and a “Construction Permit” from the concerned authority.
Limitation on Number of Registered Buyers
Developers cannot register more homebuyers than the land legally acquired can accommodate.
Access to Government Land for Developers
The new decree also outlines the process for developers to acquire extensive government land, based on specific conditions. These include making 40 percent of homes accessible to low- and middle-income segments and building a large number of homes, ranging from 500 to 5,000 depending on the city.
Additional Conditions for Government Land Access
Developers importing resources unavailable locally in quality or quantity using their own foreign currency (Franco Valuta), and reinvesting profits domestically for up to ten years, will benefit from these land access provisions.
Unanimous Referral to Committee
The proposed bill, titled “Real Estate Development and Immovable Property Marketing and Appraisal,” was submitted to the House of People’s Representatives and referred to the Standing Committee on Urban, Infrastructure, and Transport Affairs for further consideration.
