LEGAL
UPDATE
MESFIN TAFESSE AND ASSOCIATES LAW OFFICE
May 19,2025
Prepared by MTA, based on a review of a draft proclamation endorsed by the
Council of Ministers and soon to be submitted to the parliament.
Draft Proclamation Proposes Foreign
Ownership of Immovable Property in
Ethiopia
This legal update is based
on a draft law currently
under parliamentary
consideration and not yet
publicly available.
As such, its contents may
change, and none of its
provisions are legally
binding at this stage.
The purpose of this update
is to highlight possible
elements of the draft and
provide insight into what
foreign investors might
anticipate if it is enacted.
This information is not
intended as legal advice or a
roadmap for compliance.
We will continue to monitor
this development and
provide further updates
should the draft be revised,
passed into law, or opened
for public comment.
WHY IS THIS 1
DRAFT
SIGNIFICANT?
On May 1, 2025, the Council of Ministers held its 44th ordinary session and endorsed a
draft proclamation to present to the Parliament proposing to allow foreign nationals to
own or lease immovable property in Ethiopia.
Historically, foreign nationals were generally prohibited from owning immovable property
within the country, unless such ownership is granted by an Imperial Order, as prescribed
by the Civil Code. The Civil Code, introduced during the Imperial era of Ethiopia in 1960,
put forward that any foreigner found to own immovable property outside the bounds of
an Imperial Order, even in good faith, is obligated to transfer that property to an Ethiopian
national within six months. Failure to do so results in the government seizing and selling
the property, with 20% of the proceeds withheld as a penalty and to cover sale expenses.
Even where a foreigner inherits or otherwise acquires usage rights for over fifty years or a
life interest, the same six-month rule applies. This restrictive regime has remained in
effect for over 60 years.
A turning point came with the enactment of Investment Proclamation No. 769/2012, which
granted the right to own a dwelling house and other immovable property necessary for
investment to two specific groups: foreign investors and foreign nationals treated as
domestic investors. The law defined a foreign investor as a foreign national or a business
wholly owned by foreign nationals that brings foreign capital into Ethiopia. It also
included joint ventures between foreign and domestic investors, as well as Ethiopian
nationals permanently residing abroad who opt to be treated as foreign investors.
Almost a decade later, Investment Proclamation No. 1180/2020, along with Investment
Regulation No. 474/2020, reaffirmed this approach. The law maintained that foreign
investors and foreign nationals treated as domestic investors may own immovable
property essential to their investment; excluding land. It further allowed the ownership of
a single dwelling house for large-scale investors, contingent on conditions detailed in the
Investment Regulation. The regulation specified that such ownership is only permissible
for investors contributing a minimum of USD 10 million.
Now, the new draft proclamation, if enacted, would mark a major legal shift. It proposes
to repeal the provisions on immovable property found in Investment Proclamation No.
1180/2020 and Regulation No. 474/2020. More significantly, it would override any other
proclamation, regulation, directive, or customary rule that contradicts its provisions.
WHAT IS 2
BEING
PROPOSED?
The draft proclamation aims Beyond investor confidence,
to define the terms under the draft also outlines broader
which foreign nationals may economic and developmental
own residential property or goals. These include spurring
acquire land for residential housing development and
construction in Ethiopia, while affordability, narrowing the
expressly safeguarding widening gap between
Ethiopian citizens’ rights to housing demand and supply,
hold and use land, as noted in encouraging the transfer of
its preamble. According to the modern real estate
Council of Ministers, the knowledge and technologies,
proposed law is expected to supporting growth in the real
bolster the confidence of estate and construction
foreign nationals and sectors, expanding the supply
investors, attract greater chain for building materials,
capital inflow, improve and creating more
perceptions of Ethiopia’s employment opportunities for
investment climate, and Ethiopian citizens.
ultimately boost overall
foreign investment. Although not explicitly stated
in the draft, a likely underlying
This draft law now proposes objective is foreign currency
to allow foreign nationals not generation. This is suggested
only to own residential by a clause that prohibits
property but also to acquire foreign nationals from
land for residential acquiring ownership or
development; in effect, leasehold rights in immovable
granting rights to both property using loans or
immovable property and capital sourced from local
leasehold land. financial institutions,
indicating an intent to attract
foreign capital rather than
rely on domestic lending.
WHAT IS
CONSIDERED 3
AS
IMMOVABLE “the draft sets a cap: a
PROPERTY foreign national may
not own or lease more
UNDER THE than five immovable
DRAFT? properties at any given
time”
The draft proclamation defines immovable
property as land or a residential house, along with
any associated structures, that a foreign national
may hold through ownership or leasehold, in
accordance with the law. This definition aligns with
the Civil Code’s understanding of immovable
property.
Ownership or leasehold rights are subject to legal
conditions and are limited in scope. Notably, the
draft sets a cap: a foreign national may not own or
lease more than five immovable properties at any
given time. This restriction reflects the draft
proclamation’s broader intention, stated in its
preamble, to ensure that foreign ownership does
not undermine Ethiopian citizens’ access to land
and housing. The cap is likely intended to
safeguard local market access, preventing
scenarios where excessive foreign demand could
inflate prices or crowd out domestic buyers;
outcomes that would undercut the law’s objectives.
That said, the Ministry of Urban and Infrastructure
Development is empowered to revise this cap.
Adjustments may be made based on a range of
factors, including real estate market conditions,
average property price trends across urban areas,
levels of foreign participation in the housing sector,
and other indicators relevant to fulfilling the
proclamation’s goals.
WHO IS ELIGIBLE TO 4
ACQUIRE PROPERTY
RIGHT UNDER THE DRAFT?
“For foreign nationals who are not registered investors, the draft law sets a minimum financial
threshold of USD 150,000"
The draft proclamation opens the door for any foreign national to own
or lease immovable property in Ethiopia, provided they meet certain
legal and financial requirements. It also affirms that foreign investors,
as defined under applicable Ethiopian investment law, are equally
eligible to acquire such rights under the same framework.
For foreign nationals who are not registered investors, the draft law
sets a minimum financial threshold of USD 150,000. This amount shall
cover either the construction or purchase of a single residential
property, inclusive of the leasehold value of the land.
By contrast, a foreign investor holding a valid investment permit is
exempt from the USD 150,000 minimum; but only for the first property.
Beyond financial capacity, all foreign nationals/investors looking to
benefit from this draft law must satisfy a set of additional compliance
requirements:
Provide valid legal documentation confirming their identity and
nationality;
Demonstrate the financial means to meet the minimum threshold
(where applicable);
Have no criminal record; and
Obtain authorization from the Ministry of Urban and Infrastructure
Development;
WHAT RIGHTS WOULD FOREIGN 5
NATIONALS WITH IMMOVABLE
PROPERTY OWNERSHIP OR
LEASEHOLD ACQUIRE?
The draft proclamation grants foreign nationals who own or lease
immovable property the same property rights as Ethiopian nationals,
subject to existing laws. According to the Constitution, “the right to
ownership of rural and urban land, as well as of all natural resources, is
exclusively vested in the State and in the peoples of Ethiopia.” Land is “a
common property of the Nations, Nationalities and Peoples of Ethiopia
and shall not be subject to sale or to other means of exchange.”
However, the Constitution also states that “the Government shall ensure
the right of private investors to the use of land on the basis of payment
arrangements established by law,” and “every Ethiopian shall have the
full right to the immovable property he builds and to the permanent
improvements he brings about on the land by his labour or capital.”
Consistent with this framework, the draft does not grant land ownership
to foreign nationals. Instead, it allows them to own residential houses
and lease land; reflecting the same structure of rights provided to
Ethiopian nationals. The draft further defines “lease” as a land tenure
system through which an urban or rural land used for constructing a
residential building is acquired for a contractually defined period in
accordance with the applicable law.
In addition to these core rights, foreign nationals may also:
obtain a residence permit for themselves and their families;
receive a five-year multiple-entry visa; and
remit legally earned rental or sales income abroad in foreign
currency at the prevailing exchange rate, subject to directives from
the National Bank of Ethiopia.
WHAT ARE THE
INSTITUTIONAL 6
FRAMEWORKS
TO BE INVOLVED
IN THIS
PROCESS?
Several government bodies play defined roles in the implementation of the
draft proclamation, ensuring a coordinated and legally compliant process
for foreign nationals acquiring immovable property:
Ethiopian Investment National Bank of
Commission (EIC): Ethiopia (NBE):
The EIC is responsible for The NBE oversees and approves
administering and issuing the repatriation of rental or sales
investment permits to foreign proceeds legally earned from
investors, including those seeking immovable property. Such
to benefit from this draft law. It proceeds must be converted into
also provides one-stop services foreign currency at the prevailing
for permit holders and facilitates exchange rate, and the
coordination among relevant repatriation must comply with
agencies to streamline investor directives and procedures set by
support. the Bank.
Ministry of Urban and Urban Land Administration and
Infrastructure Development: Development Bureau (or its
regional/city-level equivalent):
Under the draft proclamation, this
Ministry is tasked with granting This body is responsible for issuing
permits for the acquisition of ownership or leasehold
immovable property by foreign certificates to foreign nationals
who have received the required
investors. This is done upon
permit from the Ministry of Urban
verification of a written confirmation
and Infrastructure Development
from the EIC, which must detail the
and have concluded a legally
investor’s shareholding and other
valid contract, in accordance with
relevant investment information.
applicable laws.
ARE THERE RESTRICTIONS? 7
The Ministry of Urban and Infrastructure Development may
designate specific areas or broader locations where foreign
nationals cannot own or lease immovable property. Foreign
nationals are also excluded from owning condominium housing
built for Ethiopians through direct government subsidy. However,
this restriction does not apply to housing projects developed by
federal or regional governments under public-private
partnership models or other residential development schemes
intended for commercial sale.
Additionally, foreign nationals may not acquire immovable
property using capital or loans sourced from local financial
institutions. The draft further provides that, in the case of
nationals from countries that impose special regimes on
Ethiopians residing abroad, the Council of Ministers may impose
special obligations or grant special privileges based on
reciprocity.
CLOSING
REMARKS
In conclusion, we reiterate our initial caution that the final version of the
draft proclamation may undergo significant changes; either enhancing or
diminishing its effectiveness, when presented to the House of Peoples’
Representatives. The success of this legislative initiative in attracting
foreign investment will depend not only on this draft’s provision but also on
the availability of targeted investment incentives on the real estate sector.
Its efficacy in meeting its intended goals will ultimately be measured by
the degree to which it stimulates foreign investors’ interest in acquiring
immovable property and investing in the country.
While the Ethiopian government has introduced an Investment Incentives
Regulation offering income tax exemptions and customs duty waivers for
certain sectors; the real estate sector has not been a focal point of these
incentive schemes, leaving a gap in policy support for property
development initiatives. To enhance the effectiveness of the forthcoming
proclamation, it is imperative that the government considers
implementing targeted incentives tailored to the sector.
