The Who, What, When, And How Much of Ukraine’s New Land Market Reform
Ukraine’s parliament deliberated on the landmark land market reform bill for two months until it was finally adopted on the second reading. In that time, the government changed, coronavirus swept over the world, and the very model of the market itself changed. Hromadske answers pressing questions on what the land market will look like, and when it will be open for business.
Ukraine’s parliament deliberated on the landmark land market reform bill for two months until it was finally adopted on the second reading. In that time, the government changed, coronavirus swept over the world, and the very model of the market itself changed. Hromadske answers pressing questions on what the land market will look like, and when it will be open for business.
READ MORE: Ukrainian Parliament Passes Land Market Law
1.
When, how, and for whom will the land market work?
The parliament decided to shift the starting date of the land market. Previously, government figures spoke about opening the land market from October 1 – but the actually adopted version of the law names a date 9 months later – July 1, 2021.
This is the result of a compromise that came about after it was revealed that only 206 MPs (out of 226 needed) from the president’s ruling Servant of the People party would support the bill, forcing the president to look for opposition votes to pass it.
2021 will also mark twenty years from the first time Ukrainian politicians raised the idea of creating a land market – but because of the Orange Revolution, economic crisis’, changes in government, the Euromaidan, and the Donbas war, the decision kept being pushed back.
The market will launch in a number of stages:
- From July 1, 2021, individual Ukrainian citizens will be allowed to purchase agricultural land in Ukraine, up to a limit of 100 hectares. This limit will stay in place until January 1, 2024.
- State and territory-owned land will be banned from sale until 2023. This ban will be lifted on July 2023.
- January 1, 2024 will see the second phase of land reform launched – companies will now be able to purchase agricultural land, and not just Ukrainian ones. Restrictions on land sizes will be moved from 100 hectares to 10,000 hectares (which bring the market in line with the first version of the bill.)
2.
How and for how much can someone buy land?
Buying land can only be done via bank transfer, not cash. That way, it’s easier to track whether or not the buyer is adhering to all the restrictions set in place by the law, and for the government to ensure that land is not being used as a way to launder money (by ensuring the funds in the bank account have a legitimate source.)
This will also allow the government to control how much land has been bought and sold, and the price per hectare.
The law freezes the price of land until 2030, and sets it at $900–$1,100 per hectare.
Buying agricultural land that lies less than fifty kilometers from the legal borders of the country remains banned.
People and companies who rent agricultural land will be given the right to buy it from its original owner.
3.
Who can buy, and who can’t
Only Ukrainian citizens can buy agricultural land (during the first stage of the reform) and Ukrainian companies (form 2024 onwards.)
Banks will also be able to own land, but only for short periods of time. Banks can seize land if it was seized as collateral for a loan. However, banks are required to sell any land obtained this way within a two year span at auction.
Foreigners, people without citizenship, foreign companies, and companies whose ownership is impossible to determine (for example, shell companies registered in offshore zones) will not be able to purchase land.
Only an all-Ukrainian referendum can allow foreigners to purchase Ukrainian agricultural land.
4.
What are the risks?
The introduction of a transition period in the law brings the risk of massive violations of government restrictions during the early stages of the law.
At the moment, agricultural land in Ukraine is mostly used by agricompanies, not citizens. And companies are the ones who most need the ban on the sale of agricultural land to be lifted. If a legal entity could own land, then that would allow them to use it for collateral for loans intended to further develop the agribusiness in question.
Ex-Minister of Economic Development, Tymofiy Mylovanov, believes that the current land market model adopted into law will result in an eruption of shadowy dealings:
“People who are used to gray schemes and have free cash will be able to use the new land market to build huge reserves of land – just like in the 1990s, when some groups of people seized businesses through vouchers, buying them up for pennies and using front men. This time, people will be able to buy land through dozens or hundreds of front men, who will buy 100 hectares each,” said Mylovanov.
This step-by-step introduction of a land market is meant to give a head-start to small farmers for them to be able to start their own businesses and to obtain enough land prior to large companies gaining that right.
However, this model brings doubt to the idea that opening a land market will bring economic breakthrough to Ukraine, for it is the biggest players that will be capable of making the largest investments in Ukraine’s agricultural sector.
There’s also the risk that the land market fails to work entirely the way the law stipulates: the signed law is opposed by many MPs and political parties. In particular, opposition parties “For Life” and “Batkivshchyna” have already said that they’ll be challenging the law in constitutional court.
READ MORE: "Land Reform Would Be Revolutionary for Ukraine" – Timothy Ash
/By Yaroslav Vynokurov
/Translated and adapted by Romeo Kokriatski