HOW WILL THE LAND MARKET AFFECT AGRICULTURAL LAND OWNERS?
On April 28, 2020, the President of Ukraine Volodymyr Zelensky signed the Law of Ukraine №552-9. This Law is aimed at opening the land market in Ukraine from July 2021.
This law has been actively discussed in society for several months now, because everyone is worried about how the opening of the land market will affect ordinary citizens.
In order to understand all the nuances of the new law, it is necessary to analyze it. First of all, who can be the owner of agricultural land in accordance with this Law?
- first, individuals – citizens of Ukraine;
- secondly, legal entities in which the ultimate beneficial owner is a citizen of Ukraine;
- third, the state and territorial communities.
Also, the owners of such land may be banking institutions, but only if there is an application for land as collateral. But such a land plot, the banking institution is obliged to alienate at a land auction no later than two years.
Many are worried about the question of whether foreigners will buy Ukrainian land?
In the adopted Law, the issue of the possibility of purchasing agricultural land is possible only after an all-Ukrainian referendum. Until such a decision is made in a referendum, foreign citizens can never become owners of Ukrainian lands. Also, foreign nationals may not buy shares in the authorized capital, shares or stocks in those legal entities that own agricultural land.
But so far there is no law regulating the referendum, so it is unknown how soon foreigners will be allowed to buy Ukrainian land.
The law also provides for a list of persons who cannot buy agricultural land. That is, regardless of the results of the referendum, the right to purchase agricultural land is excluded:
- for legal entities owned by non-Ukrainians, as well as if the land plots are located closer than 50 kilometers from the state border of Ukraine;
- legal entities whose participants are Russian citizens;
- persons who had connections with terrorist organizations;
- legal entities in which foreign states are participants;
- legal entities in which it is impossible to establish the ultimate owner;
- legal entities registered in offshore zones;
- legal entities and individuals to whom the Law “On Sanctions” applies.
According to the Law, there is a ban on the sale of state-owned and communally owned land.
Restrictions on the acquisition of agricultural land have been set for individuals. Yes, an individual can own a total of no more than 10 thousand hectares, but by January 2024 only individuals will have the right to purchase no more than 100 hectares.
Such a restriction may have the effect that the shadow land market will only grow. After all, large companies will buy and register land plots from third-party proxies due to the established restrictions.
Another issue that is no less important concerns the pricing of agricultural land.
The law stipulates that the value of land may not be less than its regulatory and monetary value. It is also noted that until 2030 it is forbidden to sell land at a price lower than in the normative-monetary assessment. The payment must be made in non-cash form, and the purchaser of the land must confirm the origin of the funds for its acquisition.
Today, approximately one hectare of land is estimated at UAH 27,500 on the basis of a regulatory and monetary assessment.
According to experts, a fair price should not be expected in the coming years. Because it is influenced by political instability in the country, poverty, restrictions on land acquisition and other factors.
The growth of land value will be influenced by the political and economic situation in Ukraine. The cost of land can grow by 10-15% annually.
Most of the land sold will be those that have actually been sold – those for which emphyteusis agreements have been concluded, under which the actual sale of land has been disguised in recent years. And those plots of land that are provided to the participants of the anti-terrorist operation and other privileged categories of citizens with an area of approximately 2 hectares.
Author: Nikolay Baranovskiy