A practical English summary of Ethiopia’s urban land leasehold framework
Read the full PDF: Urban Lands Lease Holding Proclamation No. 7212011
The Urban Lands Lease Holding Proclamation No. 721/2011 establishes the legal framework for acquiring and holding urban land through a leasehold system in Ethiopia. It applies to urban land throughout Ethiopia and sets out how land is offered, allocated, leased, developed, transferred, pledged, renewed, and, in certain circumstances, taken back by the appropriate government authority.
The Proclamation was issued to support a more efficient and transparent urban land administration system, respond to increasing demand for urban land, and establish clearer rights and obligations for lessors and lessees.
This page is a summary of the Proclamation and is not a substitute for the complete legal text. For the full provisions, definitions, exceptions, procedures, and requirements, read the original PDF.
What Does Proclamation No. 721/2011 Cover?
The Proclamation establishes rules concerning:
- Urban land leasehold rights
- Lease tenders and bidding
- Allocation of urban land
- Lease benchmark prices
- Lease contracts and certificates
- Lease periods and renewal
- Lease payments and grace periods
- Development and construction deadlines
- Transfer and pledging of leasehold rights
- Termination of leaseholds
- Compensation
- Clearing of urban land
- Appeals and grievance procedures
- Government responsibilities
- Penalties and enforcement
- Transitional arrangements
The law defines a lease as a system of land tenure under which the right to use urban land is acquired through a contract for a definite period. It also defines urban land as land located within the administrative boundary of an urban center.
1. Urban Land Is Held Through Lease
The Proclamation establishes leasehold as the primary system for acquiring the right to use urban land.
A person generally may not acquire or hold urban land outside the leaseholding system established by the Proclamation.
The law also prohibits a person from simply expanding an existing plot into adjacent urban land without authorization from the appropriate government body.
The system is intended to operate according to principles of transparency and accountability, with the urban land delivery process designed to support urban development and equitable use of land resources.
2. How Urban Land Is Provided
Urban land may generally be provided through two main mechanisms:
Tender
Land is offered through a competitive bidding process.
Before land is advertised for tender, the appropriate authority is required to ensure that the land:
- Is free from legal claims
- Conforms to the applicable urban plan
- Has access to basic infrastructure
- Has been properly parceled and identified
- Has the required site plans and other prerequisites
Information about land offered for tender should include its land grade, lease benchmark price, and other relevant information.
Authorities are also required to publicize annual plans showing the amount of urban land intended to be offered through tender.
Allotment
Certain categories of land may be provided through allotment rather than competitive tender, subject to decisions by the relevant regional or city administration.
These include land for purposes such as:
- Government offices
- Social service institutions
- Government housing programs
- Religious institutions
- Manufacturing industries
- Embassies and international organizations
- Projects of special national significance
The Proclamation also contains special provisions for people displaced through urban renewal programs.
3. Lease Tender Rules
The Proclamation establishes specific requirements for urban land lease tenders.
Authorities must advertise the tender and make bidding documents accessible to potential bidders.
The bid bond is determined by regional or city regulations but cannot be less than 5% of the land's lease benchmark price.
For an initial tender, the bid is generally cancelled if fewer than three bidders participate.
The winner is determined based on the bid price and the amount of advance payment offered, and the list of successful bidders and their scores must be made public.
Special rules allow certain major projects, including higher education institutions, hospitals, health research institutions, four-star and higher hotels, and mega real estate developments, to receive specially prepared land through the tender framework.
4. Lease Benchmark Prices
Every urban plot has a lease benchmark price.
The benchmark price is determined according to the circumstances of the relevant city and applicable regional or city regulations.
The Proclamation also requires price-zone maps to be prepared based on lease benchmark prices and provides that benchmark prices should be reviewed at least every two years to keep them current.
The benchmark concept is therefore an important part of determining the financial terms under which urban land is leased.
5. Lease Contracts and Certificates
A person granted an urban land lease must enter into a formal lease contract with the appropriate government body.
The lease contract must include important information such as:
- Construction start date
- Construction completion deadline
- Payment schedule
- Grace period
- Rights and obligations of the parties
- Other relevant contractual details
After signing the lease contract, the lessee receives a leasehold certificate.
The certificate includes information such as:
- Lessee's name
- Plot size and location
- Service or development type
- Land grade
- Plot number
- Total lease amount
- Advance payment
- Annual lease payments
- Lease period
6. Lease Periods
The maximum lease period depends on the type of development and location.
Under the Proclamation, the maximum periods include:
In any urban center
- Residential housing: up to 99 years
- Science and technology, research and study: up to 99 years
- Government offices: up to 99 years
- Charitable organizations: up to 99 years
- Religious institutions: up to 99 years
- Urban agriculture: up to 15 years
Addis Ababa
- Education, health, culture and sports: up to 90 years
- Industry: up to 70 years
- Commerce: up to 60 years
- Other uses: up to 60 years
Other urban centers
- Education, health, culture and sports: up to 99 years
- Industry: up to 80 years
- Commerce: up to 70 years
- Other uses: up to 70 years
The Proclamation also allows certain extensions where the nature of a development requires a longer period and provides for short-term leases of up to five years for certain temporary economic and social activities.
7. Renewal of a Lease
A lease may be renewed at the end of its term based on the prevailing lease benchmark price and other applicable requirements.
The Proclamation requires the lessee to apply in writing for renewal within the period specified by the law before the lease expires.
The appropriate authority must communicate its decision within one year of receiving the application. If it fails to communicate a decision within that period, the Proclamation provides that the renewal request is deemed accepted, subject to the conditions specified in the law.
A lease that cannot be renewed does not automatically create an entitlement to compensation under the renewal provision.
8. Lease Payments
The Proclamation allows a lessee to receive a payment period that takes into account the time required to recover the investment.
The advance payment cannot be less than 10% of the total lease amount.
The remaining balance is paid through equal annual installments during the payment period.
Interest applies to the outstanding balance based on the prevailing lending rate of the Commercial Bank of Ethiopia.
Late annual payments are subject to a penalty based on the applicable Commercial Bank of Ethiopia penalty rate.
Where a lessee accumulates three years of arrears, the appropriate authority may take and sell the lessee's property to recover the outstanding debt, subject to the provisions of the Proclamation.
9. Using the Land for Its Approved Purpose
A lessee must use the land for the purpose specified in the lease contract and within the required timeframe.
For example, land leased for a particular development or service cannot simply be used for an unrelated purpose without following the applicable process.
A lessee may apply to change the use of the land, and the appropriate authority may approve the change where the proposed use is consistent with the city's land-use plan.
10. Construction Requirements
Obtaining a lease creates obligations to actually develop the land.
A lessee must begin construction within the period specified in the lease contract.
The Proclamation allows extensions depending on the complexity of the construction and applicable regional or city regulations.
Failure to begin construction within the required period can result in penalties and the government taking back the land.
For certain categories of land provided through allotment, failure to begin construction can result in termination of the leasehold contract and repossession of the land.
11. Completion of Construction
The Proclamation also establishes deadlines for completing construction.
The standard maximum periods are:
- Small construction: up to 24 months
- Medium construction: up to 36 months
- Large construction: up to 48 months
The relevant regional or city authority determines the classification of construction projects.
Extensions may be granted depending on project complexity, but the total completion period cannot exceed:
- 2.5 years for small projects
- 4 years for medium projects
- 5 years for large projects
Failure to complete construction within the applicable period can result in termination of the lease contract and repossession of the land.
12. Transfer of Leasehold Rights
A lessee may transfer a leasehold right, use it as collateral, or use it as a capital contribution, subject to the conditions established by the Proclamation.
There are additional restrictions on transfers before construction begins or before construction reaches the required stage.
Where a leasehold is transferred before construction begins or reaches half-completion, the transfer must generally follow a transparent sale process supervised by the appropriate authority.
The Proclamation also establishes how payments, completed construction, and the transfer value are treated when such a transfer takes place.
Importantly, when a leasehold right is transferred, the contractual obligations attached to the lease also transfer to the new holder.
13. Using Leasehold Rights as Collateral
Leasehold rights may also be used as collateral, subject to the conditions established by the Proclamation.
Before construction begins, the collateral value is subject to limits based on the remaining balance of the lease advance payment after applicable deductions.
The Proclamation also provides rules for situations where a lessee defaults on a secured obligation.
Unless otherwise agreed, the building and related improvements generally follow the land-use right when the leasehold is transferred or pledged.
14. Termination of Leasehold
A leasehold may be terminated in circumstances including:
- Failure to use the land for its prescribed purpose
- A decision to use the land for another purpose in the public interest
- Failure to renew the lease when required
Where failure to use the land resulted from a force majeure event recognized under the Civil Code, the appropriate authority may allow additional time.
The financial consequences of termination depend on the reason for termination.
For example, where termination results from failure to use the land as required, lease payments may be returned after applicable costs and penalties are deducted.
Where termination occurs because the land is required for another public-interest purpose, the lessee is entitled to compensation in accordance with the applicable law.
15. Clearing Urban Land for Public Interest
The Proclamation gives the appropriate authority power to clear and take over urban land for public interest purposes, subject to the procedures and compensation requirements established by the law.
Where a person is displaced as a result, the Proclamation provides for appropriate compensation and, in specified circumstances, substitute land.
A written clearing order must identify relevant matters such as:
- The period within which the land must be vacated
- The compensation payable
- The size and location of any substitute plot
The Proclamation also provides procedures through which a person affected by a clearing order can submit a grievance and appeal a decision.
16. Appeals and Grievances
People affected by land-clearing decisions have formal avenues for challenging those decisions.
The Proclamation establishes grievance and appeal procedures and provides for an Appellate Tribunal to consider certain appeals.
This creates a formal process for addressing disagreements concerning clearing orders, compensation, and related decisions.
17. Government Responsibilities
The Ministry is given responsibilities including:
- Monitoring implementation of the Proclamation
- Providing technical and capacity-building support to regions and city administrations
- Developing a modern national real property information system
- Establishing national standards for real property information
- Preparing model regulations, directives, and manuals
Regions and city administrations are responsible for administering urban land in accordance with the Proclamation and issuing the regulations and directives required for implementation.
18. Penalties and Enforcement
The Proclamation contains criminal penalties for certain violations.
These include unlawful allocation of urban land, manipulation of tender processes, failure to disclose relevant tender information, unauthorized occupation or construction on urban land, and fraudulent conduct by bidders.
The Proclamation also provides penalties for officials who intentionally abuse their positions and for negligent conduct in specified circumstances.
Assets obtained through offences covered by the penalty provisions may be subject to confiscation by court order.
What This Means for Property Owners and Developers
For anyone acquiring or developing urban land in Ethiopia, Proclamation No. 721/2011 establishes an important framework around the right to use urban land and the obligations attached to that right.
A leasehold is not simply the acquisition of a plot. It comes with conditions concerning:
Payment → Approved Use → Construction → Completion → Ongoing Compliance
Failure to meet those obligations can have consequences for the leasehold, including penalties, termination, and repossession.
For developers, understanding the construction timelines, payment obligations, transfer restrictions, and approved land use is particularly important.
For property owners and investors, the rules concerning lease periods, renewal, transfer, pledging, and termination can directly affect the value and long-term management of an urban property.
Why This Proclamation Matters
Proclamation No. 721/2011 provides the framework through which urban land is made available for development under Ethiopia's leasehold system.
It connects the allocation of land with a series of continuing obligations:
Acquire the Lease → Pay for the Lease → Develop the Land → Complete the Project → Maintain the Leasehold
The law also establishes mechanisms for transferring or financing leasehold rights and procedures for dealing with public-interest land clearing, compensation, disputes, and enforcement.
Read the Full Proclamation
This summary highlights the major provisions of Urban Lands Lease Holding Proclamation No. 721/2011, but it does not reproduce every article, condition, exception, or procedural requirement.
For the complete legal text, including all definitions, tender and allotment procedures, lease periods, payment requirements, construction deadlines, transfer provisions, compensation rules, appeals, penalties, and transitional provisions, read the full proclamation below.