Land: too Long Real Estate

Land: too Long Real Estate

04.06.2019 Analytics

In Ukraine, land belongs to citizens only within the limits allowed not by the law but the authorities, and the problem of ownership is inherited from the totalitarian times. By the way, the moratorium on selling land operates in Venezuela, Congo, Tajikistan, North Korea, and Cuba, in addition to our country…

Law and Practice

Neither the Verkhovna Rada nor the Constitutional Court has seen violations of Article 41 of the Constitution of Ukraine for many years. According to this Article, everyone has the right to own, use and dispose of their property. Moreover, the decision of the European Court of Human Rights (ECHR) from May 22, 2018, recognizes the prohibition of purchasing and selling agricultural land as a violation of citizens’ rights.

A difficult path of the domestic land market began during the first years of Independence when about seven million Ukrainians became owners of agricultural land after the destruction of collective and state farms. However, a moratorium was imposed on its sale in 2001, allegedly to protect the owners from venturers. Although 17 years have passed, the moratorium still operates, literally burying the hopes of almost half a million landowners who have not used the right to freely dispose of this land.

Nevertheless, anyone can purchase land for agricultural purposes, and lawyers can provide legal schemes. Meanwhile, irresponsible tenants deplete the soil, sowing them with sunflower and corn by rotation. Thus, the shadow market imitates some market mechanisms for land, but the lack of an owner only hurts this land. This kind of “shadow” is large but not homogeneous.

The Shadow of the Market

The country’s land market can be divided into black and gray parts. The first one concerns the illegal use of land that has no legal status. It commonly refers to state lands, lands of former collective property, field roads and uncalled units, which are processed without any contracts. Additionally, the land property whose owners have died is being processed; this property can’t be transferred to anybody, so farmers continue using it.

The gray zone of the land market contains transactions for land sales through judicial decisions and emphyteusis contracts. The absence of open bidding forces interested citizens to find an alternate way to formally circumvent the ban. However, in such circumstances, a seller can’t get a good price, and a buyer risks to lose land due to the inferiority of their transaction. What is the appropriate price?

Price Issue

The highest rents for land are in the traditionally agrarian and metropolitan regions – Cherkassy, Poltava and Kyiv districts. The average annual cost of renting a hectare is  $84 for the Cherkassy region, and $80 and $62 for the Poltava and Kyiv regions, respectively.

If the land market started its functioning, the shares owners in the Cherkasy region could receive $1,670 per hectare, in Poltava – $ 1,600, and in Kyiv – $ 1,240. Still, in Polissya, a significant part of the land in the swampy area, and the demand for land near the zone of armed Donbass conflict is low, therefore, sellers could get $564 per hectare in the Volyn region, $613 in Zhytomyr, and $665 in Lugansk.

After the increase in the overall cost, the rent prices will rise. In addition, experts point out that land prices can be 2-5 times higher, as the rent prices are lowered on average fivefold due to the moratorium and local monopolies!

What Will Happen if Market Opens

In countries experiencing the land market opening, its value grew by an average of 15-25% during the first two-three years, and then the growth became slower. The process took place within the limits of general denationalization of property. The situation in Ukraine is different as the accumulated offer has been created during the years of the moratorium. We mean that in normal market conditions, there are up to 1.5-3% of the land in circulation each year due to the change of owners. In Ukraine, 7-11% of landowners are considering the possibility of selling it at the moment.

Due to this and the fact that land prices are substantially underestimated, the increase in value will be sharper than elsewhere before when the restriction disappears. Therefore, the land market is highly interested in speculators.

The growth will continue but powered by another source – investments that should go into the agricultural sector due to the opening of the land market. After this, Ukraine will need another 5-7 years to catch up with its neighbors under favorable conditions.

A Gap in the Moratorium

To circumvent the discriminatory law, many citizens use the emphyteusis to freely dispose of their land. This is an agreement on the acquisition of rights to use land which belongs to another person for agricultural purposes. It can be both timely and indefinite.

This refers to the right to use another’s land for agricultural purposes, which can be resold, pledged to the bank or inherited. For lands of the state and communal property, the period of emphyteusis can’t exceed 50 years. Additionally, the state and communal land under emphyteusis may not be alienated, included in the authorized capital of an enterprise or transferred to a bank.

Emphyteusis differs from rent by the fact that a contract does not specify time limits, but there is a possibility of sale and inheritance of the right to use the land. In fact, the owner can’t sell the land itself but can sell the right to manage and handle it.

According to the analyzed data on the inventory of all arable land in the cadastre within the World Bank project framework, only in 2016, new owners got 11,2 thousand pieces of agricultural land with the total area of 40 thousand hectares under emphyteusis schemes.

First of all, this is beneficial to owners of gardens, vineyards and other perennial plantations, because it gives a possibility to protect their right to own cultivated plants and not to lose the rent when that garden becomes a commodity. Emphyteusis is not interesting to big market players whose land bank consists of units.

However, in the case of emphyteusis, landowners who sell the right to use it long-term due to the restriction of competition do not receive fair value for their share. At the same time, buyers still don’t become owners of these territories when paying for the land.

There are certain risks of using emphyteusis for purchasing land. Firstly, people don’t specify the real sum of the transaction in order to avoid paying taxes. So, there is a risk that the seller will receive not the real amount of money but the sum specified in the contract. Secondly, the fiscal service can recognize the agreement of emphyteusis as an “apparent transaction”, which is invalid. The main risk for the buyer is that he doesn’t become an owner, but only formalizes the right to use the land in contractual relations.

Artificial restrictions on the right to own land increasingly slow down the agriculture development. This restriction of ownership applies to those people who are not engaged in agriculture and could spend the proceeds from the sale of land for their own needs, including business projects. It also applies to those who want to work effectively in this field. Due to the lack of rights to leased land, farmers are simply not interested in investing time, effort and money in what they do not actually own. For the same reasons, limiting the right of ownership to land prevents livestock from developing.

Please read: The most important recommendations on business protection in Ukraine for 2019

Read the news in our app! 
Google Play: https://play.google.com/store/apps/details?id=ua.com.grodas.ldaily&hl=ru
App Store: https://itunes.apple.com/us/app/ldail/?p=89234y/id1354384907?l=uk&ls=1&mt=8

Pay attention!
“SNN GROUP” owns the exclusive copyright of the information in this article.
The author has the sole right to control the use of this material.
It means the prohibition of using this information without our consent. The term “information” means texts, comments, photos, images, and other materials.
Any use of the information or any part of this article without the written permission of the author is prohibited.
The term “use” means copying, adaptation, re-writing, modifications, etc.
In the case the irregularities are detected, the author has the right to copyright protection in accordance with the procedure established in Article 50-53 of the Law of Ukraine «On Copyright and Related Rights».

Other articles

  • The price of oil broke a long-standing record
    News

    The price of oil broke a long-standing record

    During trading on Monday, October 11, the price of a barrel of Brent oil rose by 2% to $ 84.01. She reached this mark for the first time since October 2018. US WTI oil rose by $ 1.62 to $ 81.3 – the highest price since 2014, according to Reuters. It is noted that Brent […]

  • From 2023, multinational corporations must pay corporate tax at a rate of at least 15%
    News

    From 2023, multinational corporations must pay corporate tax at a rate of at least 15%

    The agreement on a single corporate tax rate of at least 15 percent was signed by 136 states, which account for more than 90 percent of world GDP. The agreement is aimed at combating tax evasion by international corporations. The initiative was also signed by countries that were initially opposed to tax reform, such as […]

  • The NBU has calculated “on hand” in the population up to $ 35 billion
    News

    The NBU has calculated “on hand” in the population up to $ 35 billion

    The savings of Ukrainian citizens outside the banking system are estimated at $ 30-35 billion. This estimate was given by the chairman of the National Bank Kyrylo Shevchenko during the Kyiv Economic Forum. There are different estimates of the “gray” economy. We in the National Bank believe that this is up to 30% of GDP. […]

  • The NBU has increased the purchase of currency on the interbank market 15 times
    News

    The NBU has increased the purchase of currency on the interbank market 15 times

    During the week, the National Bank of Ukraine bought $ 228 million on the interbank foreign exchange market. At the same time, the central bank did not sell currency on the interbank market. So the NBU continued to buy currency on the interbank market, the bank increased it compared to last week ($ 15 million) […]

  • Musk told when the first European Tesla will appear
    News

    Musk told when the first European Tesla will appear

    The new Tesla factory in Berlin may release the first electric cars next month. CEO Elon Musk stated this. Speaking at the plant, Musk said he hoped to get the green light to begin production in the coming weeks. The last consultation on public concern about the plant ends on October 14, after which the […]

  • Two other Chinese developers have problems paying on bonds
    News

    Two other Chinese developers have problems paying on bonds

    In China, two more developers are unable to repay their debts: Fantasia Holdings has been unable to repay bonds worth $ 205.7 million, and Sinic Holdings is uncertain about the repayment of $ 246 million in bonds, the BBC reports. The day before, trading in Evergrande shares was suspended on the eve of “an announcement […]

  • Telegram has 70 million new users amid Facebook failure
    News

    Telegram has 70 million new users amid Facebook failure

    Telegram Messenger registered more than 70 million new users against the background of a large-scale failure of the social network Facebook and its services. The founder of the messenger Pavlo Durov announced this in his Telegram-channel. “Telegram’s daily growth rate is an order of magnitude higher than normal, and in one day we have received […]

  • The head of Ukreximbank is temporarily resigning
    News

    The head of Ukreximbank is temporarily resigning

    Ukreximbank’s Chairman of the Board Yevhen Metzger has written a statement resigning during the investigation into the attack on journalists. “The situation around the bank is unacceptable. My overly emotional reaction and unrestrained behavior towards journalists are not justified. I am fully aware of my responsibility,” the statement said. To remove partially the damage to […]

Read also

Land: too Long Real Estate
News

Salesforce announced the purchase of Slack messenger for $ 27.7 billion

Salesforce is one of the world’s largest players in the cloud computing sector. They will buy Slack Technologies, the owner of Slack’s corporate messenger. The Wall Street Journal reports, Messenger will cost Salesforce $ 27.7 billion, which will be the largest acquisition of the company in its history. The terms of the deal include that […]

Next
Land: too Long Real Estate
News

The AMCU fines Dragon Capital by more than 118 thousand UAH

According to Interfax-Ukraine, Antimonopoly Committee of Ukraine (AMCU) has fined the Dragon Capital Ltd. in the amount of 118,194 thousand UAH by Dragon Capital Ltd. Production concentration  more than 50%. According to a law of economic competition defence, the committee permit is obligatory during the economic activity subject concentration with more than 50% of shares […]

Next
Land: too Long Real Estate
News

Oracle becomes a №1 candidate of buying the TikTok after the company rejected for Microsoft

Microsoft`s shares fell slightly on Monday before the opening of trading due to the news of the failure the deal of buying the popular application TikTok in Chinese ByteDance. Through the support of the deal by President Donald Trump, Shares of Oracle, which is considered №1 candidate of buying TikTok increased by 10% before the […]

Next
Land: too Long Real Estate
News

A new wave of fraud: Platinum Bank borrowers can fall into a money trap

Citizens who have debts to the Ukrainian Platinum Bank, should be warned of financial scams that require them to repay the loans by some extraneous financial enterprise. About this fact notify the authorized financial institution faces in PJSC Platinum Bank official website. Offenders are spreading among the borrowers of the Platinum Bank messages with a […]

Next
Land: too Long Real Estate
News

Poroshenko’s former plant has paid off 300 million in debt

The Kyiv shipyard Kuznya na Rybalskomu (Ukrainian: “Кузня на Рибальському”) has returned to the state budget more than 300 million UAH, which the Ministry of Finance had previously paid on the company’s debts. It is noted that in 2017 the government provided state guarantees for a plant loan from Ukreximbank. The credit line allowed to […]

Next
Land: too Long Real Estate
News

Britain will provide $ 6.5 million for the aid to Ukraine

UK will provide humanitarian assistance to Ukraine in the amount of 6.5 million dollars to support the regions in the east of the country affected by the armed conflict and the pandemic, said in the statement issued by the Foreign Ministry of the United Kingdom. This was reported by TASS. As specified, the allocation of […]

Next
Land: too Long Real Estate
News

Losses of Ukravtodor companies amounted to over UAH 100 million

The total net losses of subordinate companies of the State Agency of Motor Roads of Ukraine in 2020 amounted to UAH 116.5 million. This is evidenced by the report on the implementation of the financial plan, which analyzed the Marlin project. It is noted that according to the results of 2019, Ukravtodor suffered losses amounting […]

Next
Land: too Long Real Estate
News

SpaceX will connect Starlink to planes and all trucks

Elon Mask’s company has applied to the Federal Communications Commission (FCC) for permission to connect cars, trucks, cargo ships and aircraft to its network of fast-growing Starlink Internet satellites. This is what Verge says. The completed document states that SpaceX is requesting a comprehensive license to operate Starlink terminals on so-called “mobile ground stations, which […]

Next
Land: too Long Real Estate
News

Twitter shares up by 7%

Twitter shares that have risen by 10.5% since the beginning of the year rose by 7.34% on Wednesday in the announcement of plans to launch the Gryphon subscription platform. Twitter posted an ad for a “senior division engineer” on its website in the vacancies section. Twitter did not comment anything, but investors were happy to […]

Next
Land: too Long Real Estate
News

Tesla’s value rose above $ 500 billion

Shares of US electric car manufacturer Tesla continue to rise sharply amid news of the company’s future accession to the S&P index. On Tuesday, November 24, the market value of Elon Musk’s company crossed the $ 500 billion mark for the first time. Tesla shares are said to have risen nearly 550 percent this year, […]

Next
Land: too Long Real Estate
News

The Austrian investors to construct the new plant in Ukraine

The leadership of the Ukrainian industrial complex of LLC “Zakhid Agroprodukt” has reported to the mass media about receipt of the perspective offer from the Austrian investors. Foreign entrepreneurs whose names haven’t disclosed yet took the initiative to invest about 2 million euros in the development of the entity in the territory of the Ternopil […]

Next
Land: too Long Real Estate
News

Nissan has introduced a new sports car

Automaker Nissan has introduced a new car Nissan Z. The sports car is equipped with a 3-liter twin V6 turbo engine, 400 horsepower and 350 Nm of torque. Nissan Z can accelerate to 96 km / h in 4.3 seconds. The sports car is equipped with a 6-speed manual transmission. A 9-speed automatic transmission will […]

Next
Land: too Long Real Estate
News

Amazon’s advertising revenue in 2020 grew by 52%

Amazon’s digital advertising business (AMZN) has received a new high estimate of growth in 2020 from experts from the global research company eMarketer. Amazon shares, which have not changed much since the beginning of 2021, rose at the beginning of trading on Wednesday. EMarketer analysts gave investors another confirmation of the strong growth of the […]

Next
Land: too Long Real Estate
News

AT&T shares fall sharply due to dividend cuts of 40% -43%

Shares of AT&T fell 5.8% on Tuesday, showing the largest one-day decline since June 11, 2020, when shares fell 6.1%. Shares of AT&T rose first on Monday, then fell in the second half of the trading session. The initial growth was due to positive assessments of the future merger agreement between AT&T WarnerMedia and Discovery […]

Next
Land: too Long Real Estate
News

UBRD sold to China Company

The State Property Fund of Ukraine representative informed that 99,99% of Ukrainian Bank for Reconstruction and Development (UBRD) had been sold to Bohai Commodity Exchange within the auction second round. The State Institution posted this information on the official web-site. The transaction value consists 82,8 million UAH. The asset’s cost of Ukrainian bank was underestimate […]

Next
Land: too Long Real Estate
News

Poland wants to participate in the Nord Stream-2 certification

The Polish oil and gas concern PGNiG wants to take part in the certification procedure of the Russian Nord Stream-2 gas pipeline. “PGNiG and PGNiG Supply & Trading have applied for inclusion in the certification process of the Nord Stream-2 gas pipeline operator. The outcome of the review determines whether the pipeline owner will receive […]

Next
WP2Social Auto Publish Powered By : XYZScripts.com