Since 1993, the Ethiopian government has been using the urban land leasing system to monetize the increase in land value created due to factors other than private investment. Thus, this paper by Seid Hussen Yimam, Hans Lind and Belachew Yirsaw Alemu aims to explore and understand whether Bahir Dar city is leveraging the urban land lease system as a strategic value capture instrument to enhance its local revenue or not.

This study has used the qualitative research method and in-depth analysis. The information needed to reach the goal of this study has been gathered through a desk review of documents and key informant interviews with experts and brokers. The study has found that most urban land is held under a permit system, with landholders paying a small amount of land rent per annum. The study also found that most of the city’s land was given away through administrative allotment at low and out-of-date benchmark prices, which hurt the city’s lease income.

Also, it has been found that there isn’t enough enforcement of lease payment collection, which hurts the city’s ability to make money from urban areas. So, the city isn’t using the public land leasing system as a strategic way to get more value out of the land. Based on these results, this paper suggests that the government set up a modern property tax system to capture the increase in value of land with a permit. Also, the study plans to do empirical research to find the factors that significantly impact benchmark prices and to update the benchmark price based on those factors regularly. Moreover, the study has suggested proper enforcement of the lease payment collection in the city.

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