· Capital Ethiopia
EIH navigates growing friction with investors over monetizing state land assets
Topics:LandInvestment
Summary of the Capital Ethiopia report
Ethiopian Investment Holdings wants to put government land into joint ventures as high-value equity, not lease it at low rates. Investors in real estate and manufacturing object that this reduces their stake and that weak infrastructure should lower the valuation. The fund's deputy chief executive says it is still looking for a way through.
Key points
- Ethiopian Investment Holdings seeks to use government land as high-value equity in joint ventures.
- Investors prefer lower lease payments and say poor power, water and roads should reduce land values.
- EIH manages 27 large state-owned enterprises, and its new projects rely on land as the main government contribution.
- The fund is looking for long-term partners such as Gulf sovereign wealth funds and European infrastructure funds.
Real.et analysis
Capital reports that Ethiopian Investment Holdings (EIH), the sovereign wealth fund, faces tension with investors over the value it puts on government land. EIH wants to count land as high-value equity in joint ventures. That gives the government a minority or majority stake in a project. Investors prefer low lease payments and a transparent lease system. Meleket Sahlu, Deputy CEO of EIH, said the fund is still working through the problem.
The report says investors in manufacturing and real estate object for two reasons. A high land value reduces their share of the venture or raises the capital they must bring. They also say weak power, water and road connections should lower the value of a plot, even in a good location. EIH manages 27 large state-owned enterprises, and its new projects depend on land as the main government contribution. The fund now looks for long-term partners, such as sovereign wealth funds from Gulf countries and European infrastructure funds.
What this means for the property market
Many large mixed-use and housing projects in Addis Ababa stand on state land. The way that land is priced affects which projects go ahead and what the finished units cost.
- A high land value can raise prices. If a developer must give up more equity or bring more capital for the land, the cost can pass into the price of flats and shops.
- Slow talks can delay supply. A dispute over valuation can hold a project before work starts.
- Infrastructure counts. Investors link land value to power, water and roads. Buyers can apply the same test to a project site.
What this means for buyers
If you buy in a joint venture between a state body and a private developer, ask who holds the land right and on what terms. Ask if the land contribution is final. A project whose land terms are still open carries more delivery risk. The report calls the way EIH settles this question an indicator for future urban redevelopment deals.
Our land lease guide explains how land rights work. See our guide to real estate developers in Ethiopia for how projects are funded, and buying property in Ethiopia as a foreigner for the rules that apply to foreign buyers.