Real Estate Industry of Ethiopia (Definition & Types)

Real Estate Industry of Ethiopia.

The real estate industry of Ethiopia is one of the high in-demand ones, especially for aspiring investors who’re looking forward to joining the club. Building a network in the field being one thing, knowing well the industry is such a crucial stepping stone.

Of course, the sector majorly resides in Addis Ababa, one of the fastest growing cities in the whole Africa. Whether you are looking to become a passive investor or want to acquire properties to generate any revenue, getting a bigger picture of the city is gonna have an impact on your journey.

Besides the city being the right destination for real estate companies to invest in building luxury apartment homes, real estate has been one of the fastest growing industries of the country, contributing a large sum to the nation’s economy GDP.

To help you understand what matters most here, in this blog post we’re going to talk about the ins-and-outs of real estate, the types, laws, basic process of investing in real estate in Ethiopia, and the whole industry based on economics, so stay tuned!

What is Real Estate? Definition for Ethiopian Investors

By definition, real estate is a building, property, land, or any permanent structure that includes roads, fixtures, and utility systems. The thing is real estate doesn’t have a different or special meaning for Ethiopians, African’s, India’s, Italy’s, or other investors.

What we want to let you know is that, at the national level, it is being seen as this grand thing of something that’s hard to understand by anyone. If you tell someone in Ethiopia that you’re working in the real estate field, they automatically think you’re filthy rich.

It doesn’t have to be like that though. Yes, it is such a lucrative sector to be in besides construction, banks, insurance, and hotels, however, it is just one of the many fields to do business out there. Keep it that way throughout your journey of becoming an investor yourself.

Real Estate vs. Real Property: What’s their Difference?

Earlier we have said that real estate is a property. However, when we get deep into the rabbit hole, there’s some key differences between real estate and real property. The term real estate refers to land, alternatively real property is all about examining the rights related to that land.

If you’re someone in Ethiopia who’s NEW to the idea of real estate, you also need to know this, and tell the differences between the two. In return, helping you understand the nuances of the land you own in downtown Addis Ababa, and also how you own it for the long haul.

Real Estate, to begin with, refers to the physical lands, structures, and resources attached to it. The general public also assumes that the idea of real estate encompasses real property. Still and all, from a legal point of view, the distinction between them is very important. 

On the other hand,…

Real Property refers to the physical property of the real estate, and it includes a bundle of ownership and usage rights. This is crucial in real estate where there are a number of key players in the field from developers, owners, renters, to lenders, and anything in-between like agents and brokers.

Broadly speaking, the difference between real estate and real property is all about the inclusion of the bundle of rights. The real property consists of both physical objects and common law rights. Now, you guessed it, real estate consists only of physical objects.

Types of Real Estate in Ethiopia (Commercial, Residential, etc…)

In as much as we’re talking about the real estate industry of Ethiopia, we need to touch on the most common types of real estates in Ethiopia. Commercial, residential, industrial, or land, which takes the leading type? We have an answer for that in seconds!

Real estate may be a land, residential, commercial, industrial, or something built for a special purpose in mind. It can also be owned by one person, but used by another through rental/lease arrangement and agreements between the participant parties. 

For anyone looking to understand how the real estate industry of Ethiopia works and what each of the major categories represents, this is going to be a down-to-earth guide. Each with a unique purpose and utility, let’s see the main types of real estate.

Residential Real Estates in Ethiopia

Residential real estate is one of the most common types of real estate in Ethiopia, and is the asset class that most people are familiar with (Ayat Real Estate and Federal Housing Corporation of Ethiopia has mastered this!) — Making sure you get your answer right off the bat.

Such types of real estate consists of any property used for residential purposes, providing housing for individuals, families, or groups of people. In Ethiopia, there are a number of real estates targeted at building luxury and standard residential apartments.

Residential real estates examples are hut, villa, mobile dwelling (like VR Cars), single-family homes, multi family homes, high-value homes, vacation homes, modern apartments, portable house, attached house, detached house, condominiums (condos), duplexes, triple-deckers, quadplexes, cooperatives, townhouses, and other types of living arrangements with new construction and resale homes included.

Commercial Real Estate in Ethiopia

NEXT to residential real estate, we’ll find commercial real estate in Ethiopia. Commercial property refers to any land, property, and buildings that are used exclusively by individuals to carry out their business operations. 

Commercial real estate examples are stores, hotels, groceries, restaurants, theaters, offices, gas stations, strip malls, shopping centers, complex apartments, medical and educational buildings (including hospitals, clinic, university, and campus), and other business facilities.

Note: apartment buildings, in addition to coming as mixed-use purposes, are often categorized under the types of commercial real estate, even though they are specifically used for residences. That might be because they are owned to produce a positive cash flow income, which is business.

Industrial Real Estate in Ethiopia

Industrial Real Estate includes any land, property, or buildings that are used for factories, logistics, manufacturing, construction, transportation, mechanical production, distribution of goods, storage or warehouses, or research and development purposes. Etete Group and BamaCon Real Estate have mastered this type.

Note: some buildings that distribute goods or other activities are considered commercial real estate. Because zoning, construction, and sales are handled differently during the agreement processes, don’t forget to jot down this slightly different classification in your notebooks.

The Other Types of Real Estates:

Other than the above-mentioned 3 different types of real estate in Ethiopia, we have yet to find other ones even though they aren’t much popular like the residential, commercial, or industrial ones. These types are Land and Specific Purpose real estates.

Land Real Estate refers to a vacant land like ranches, orchards, timberland, agricultural farms, or a subdivision in its early development, undeveloped or reuse stage. Mind that land is a baseline for all types of real estate. It is acquired by developers, combined with other properties (assembled), and rezoned to increase both its density and value of property in the market.

Last but not least, Special Purpose Real Estate is a property that is used by the general public services. Such types of real estates in Ethiopia include Queen of Sheba cemetery, Abune Petros Statue, Axum Monument, Addis Ababa Sub-City Government Building, Abrehot Library, Adwa Museum, Entoto Park, Medhanialem Church (Places of Worshiping), Nazareth School, and others.

How to Invest in Real Estate Ethiopia or Own Apartment in Addis

We actually have a dedicated blog post that talks about how to start a real estate business in Ethiopia, including investment options. Even so, in this section, as it makes sense to the title, we’ll give you a few tips on how to invest in real estate in Ethiopia or own an apartment in Addis Ababa.

According to ATTOM, a business that oversees nation’s premier property database, on a research done back in 2021, it reports that U.S. home sales report shows that sellers had made a profit of $94,092, a 45.3% return on investment (ROI), a 45% increase from $64,931 which was achieved in 2020.

Real estate investment revenues come from a number of different ways. To list a few of them: rent, leases, or appreciation of the real estate’s value. Just like that, there are a number of methods to achieve that including homeownership, investment or rental properties, and house flipping to the upper and upper middle class. 

The bad news is that your real estate investment in a general sense is dramatically affected by its location and factors like employment rates, the local Ethio economy, crime rates, transportation facilities, school quality, municipal services, property taxes, and other amenities.

When it comes to the real estate location factor in Ethiopia, you don’t have to worry much though. This is because almost all of the real estate’s are targeted Addis Ababa for their projects. Not only that, but also most of the projects are located at the eastern part of it from Legetafo, Summit, Ayat, CMC, to Figa.

The Basics of Purchasing an Apartment in Addis City

As people of the country or abroad are significantly migrating to Addis in the hopes of making a better living as well as wages, the city is a perfect spot for an investment. Even better, it is true for real estate — in large! This is because more and more people look for property for sale or rent as a welcoming.

Whether it is a single-family home or a G+20 storey apartment, purchasing a real property in Addis, is powered by a real estate agent like me, broker or attorney who specializes in transactions. Financing options here depend on the type of projects you’re buying and your resources like the CASH you have in the pocket for outright deals.

To make things as smooth as possible, traditionally there is a real estate-specific loan provided by most real estates like Ayat Share Company, and that’s called a mortgage. Mortgages come in many forms and are normally backed by the federal government of Ethiopia or private real estates as noted. 

Other than real estate down payments of mortgages, purchasing real estate apartments can be done through lending sources like commercial banks of Ethiopia, hard money lenders, private money lenders, or out-of-pocket. Sophisticated solutions such as crowdfunding platforms can also allow you to acquire real estate in other ways.

REITs (real estate investment trusts), RELPs (real estate limited partnerships), and MLPs (master limited partnerships) could be your last options for ways to purchase an apartment in Ethiopia. In addition to REITs, you can also get yourself into real estate investment by ways of exchange-traded funds (ETFs).

Ethiopian’s Real Estate and Construction Laws (2024)

You have to know first that all lands in Ethiopia belong to the government. Sure land can be bought, leased, or passed between family members, and due to its high value, there are many local laws that ensure its transactions are properly performed and recorded as well. 

The legal definition of real estate or real property is land and the buildings on it, which can also be owned by more than one person at a time. Just like that, real estate law governs who may own and use the land in the real estate industry of Ethiopia, plus the rest of the world.

Yet, the most crucial part of Ethiopians real estate laws is that state and local governments have rules. The rules concern the purposes for which land may be used. For instance, a plot of land must be used according to zoning laws, and landowners may not damage the surrounding environment.

As a real estate buyer or renter in Ethiopia, to be eligible for the involvement of buying or renting a building, you have to meet the criteria of an Ethiopian citizenship, having Ethiopian parents, and being someone who’s Foreigners of Ethiopian origin by blood, or any other means.

As a real estate developer or company in Ethiopia, to be eligible for the involvement, you have to have a building permit (in three categories of buildings), or all residential construction must adhere to comprehensive codes and standards governed by the local, & state laws.

Ethiopian Real Estate Industry (Based on Economics)

The real estate industry is a critical driver of economic growth in Ethiopia, and housing starts. It has contributed 12.5 percent to domestic growth in the past 10 years. In addition to that, the income generated by real estate is growing by 14.1% every year.

From statistics based on the national level, there is also a 37% increase of investment in real estate in Ethiopia. The number of new residential construction projects in any given month is a key economic indicator. It includes building permits, housing starts, and housing completions data.

When it comes to building quality homes in the nation to fulfill the needs of luxury real estate for sale and rent in Addis Ababa, there you find a number of investors and top-notch developers keeping a close eye on housing starts because the numbers can provide a general sense of economic direction. 

The types of new housing starts here are going to give clues about how the economy is developing over time. Considering that connecting with one of the best real estates of Ethiopia, which could provide you with multiple ongoing projects, is not that much difficult too. 

If you are ready to begin your journey on the path to becoming a homeowner, we are here to help you. Remember, if housing starts indicate more multifamily, it could signal an impending supply shortage for single-family homes, driving up home prices.

Overall Guide on Real Estate Industry of Ethiopia:

Overall, the definition of real estate in Ethiopia is this, it is a form of real property that is something you own attached to a piece of land. It can be used for residential, commercial or industrial purposes, and typically includes any resources like water or minerals.

As a first-time homebuyer status, you have a variety of grants, loans, and down-payment assistance programs available to you. The value of real estate becoming a leading indicator of an economy’s health, it is generally the most valuable asset a person can acquire.

The real estate industry of Ethiopia appreciating in price over time, millions of jobs in home improvement, development, lending, insurance and business are directly impacted by the market. Its value is also reflected in homeownership, rental, and property development rates.

To recap, whether buying a home in downtown Addis Ababa to live in or as an investment property, working with an experienced, local real estate agent like me can help you navigate the market in your area of interest, as it is the single most valuable asset you’ll ever own.

Having said that, thanks for reading this blog post to understand what real estate is in Ethiopia, how the industry works, and what the most common real estate laws are. To keep on learning, or level up in starting the business, don’t forget to visit us often or contact us anytime.

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