Frequent lease price increases in Ethiopia’s real estate sector are increasingly eroding investor confidence. A recent lease payment dispute between the Sheger City Administration and residents of the CCD (Country Club Developers) gated community has also raised broader questions about the country’s land lease system and adherence to due legal process.
Legal experts warn that the controversy has triggered significant concern within Ethiopia’s real estate industry. Beyond raising fundamental questions about the sanctity of contracts and land tenure security, the dispute is undermining public trust in the system that governs urban land ownership.
For years, the promise of a “99-year lease” has been a cornerstone of Ethiopia’s strategy to attract domestic and diaspora investors into the housing development market. The guarantee of long-term tenure has helped fuel significant investment in residential real estate.
However, a recent directive issued by the Sheger City Revenues Authority has shaken that sense of stability. The directive requires residents—including those who have held legal title deeds for decades—to sign entirely new lease agreements and pay “adjusted” fees that many homeowners describe as exorbitant.
According to official documents released in January 2026, residents are being required to conclude new lease contracts based on a revised valuation of approximately 4,541 birr per square meter. The directive is not framed as a proposal. City authorities have warned that residents who fail to comply could face severe legal consequences.
Citing Tax Administration Proclamations No. 202/2009 and 203/2009, the city administration announced that properties belonging to those who refuse the order could be seized and sold at auction.
Legal scholars argue that the move lacks a clear legal basis in federal law and may violate the constitutional division of authority between federal and regional governments.
Arba Beyene, Co-founder and Partner at Ethio Alliance Advocates LLP and a legal consultant, says the primary legal framework governing the dispute is the Urban Lands Lease Holding Proclamation No. 721/2011—the federal law that regulates urban land tenure across Ethiopia.
According to Arba, the proclamation was designed to ensure certainty and security for leaseholders, not to serve as a flexible tool for local administrations seeking additional revenue.
“The proclamation was designed to give certainty and security to holders, not to be a ‘water tap’ that local administrations can open whenever they want additional revenue,” he said.
Under Article 16 of the federal law, the core terms of a lease contract—including its duration, grace periods, payment schedules, and construction timelines—must be clearly defined at the outset. Importantly, the proclamation contains no provision allowing a city administration to unilaterally increase lease prices after a contract has been signed and the land has already been occupied.
“If the federal legislature intended for lease prices to fluctuate with inflation or market conditions, it would have included a price revision clause with a defined ceiling,” Arba explained. “The absence of such a clause appears intentional and is meant to protect the rights of leaseholders.”
The Sheger City Administration, however, has defended the revised pricing as a necessary adjustment to reflect current market values. Analysts say the city may be conflating two separate legal concepts: benchmark pricing for new land allocations and binding contractual obligations for existing leases.
Current laws require municipalities to revise their lease benchmark prices every two years, but this process is intended to apply only to new land supplies—land that has not yet been auctioned or leased. Applying 2026 benchmark prices to a contract signed in 2010, legal experts argue, contradicts the fundamental legal principle that laws and regulations should not be applied retroactively.
The implications of the dispute extend far beyond the CCD community. The concept of a 99-year lease has long served as a key incentive for attracting real estate investment in Ethiopia.
If lease costs can be increased dramatically after contracts are signed, analysts warn, the promise of long-term tenure risks becoming meaningless.
Economists say such uncertainty could have a chilling effect on future investment in the housing sector.
“Who will invest millions in building a home today if the price of the underlying land can change tomorrow?” one analyst asked. “This creates a sense of tenure insecurity. Homeowners begin to feel like government tenants who never know when the next adjustment will arrive.”
Under Ethiopia’s constitutional framework, the federal government holds the authority to enact framework laws governing land and natural resources. Regional governments and city administrations are responsible for land administration, but they cannot issue directives that contradict federal legislation.
Legal analysts therefore argue that Sheger City’s directive may represent an overreach of administrative authority. By imposing new financial obligations not provided for under the Federal Lease Proclamation, the city risks acting beyond its administrative mandate.
Industry observers warn that such actions could create a dangerous precedent in which property rights depend on the decisions of local administrators rather than the stability of national law.
“When the government says, ‘Accept the new price or we will seize and sell your property under tax law,’ that is not a negotiation—it is a threat,” one industry expert noted.
Experts stress that while revenue collection is important for urban administrations, it should not come at the expense of the rule of law. Many are now calling for federal authorities to clarify the legal boundaries of municipal power to prevent similar disputes from spreading and potentially destabilizing Ethiopia’s urban land tenure system.
