This commentary analyzes Proclamation No. 1357/2024, focusing on its framework for real property valuation in Ethiopia, including its purpose, system, methods, responsibilities, and the role of valuers. The Proclamation seeks to establish a transparent and structured approach to real property valuation to address critical aspects of the real estate market.
I. Purpose and System of Real Property Valuation
The Proclamation outlines multiple purposes for conducting real property valuations, including property tax assessments to ensure fair taxation, sale and purchase transactions to establish market-driven prices, and collateral evaluations for bank loans to assess risks. Other purposes include resolving court disputes through impartial valuations, managing inheritance distributions, determining compensation claims, setting appropriate insurance coverage, and establishing fair rental prices. It also accommodates other valuation scenarios as needed.
The system emphasizes clear valuations based on current local market data. Certified valuers from authorized bodies conduct these assessments to ensure reliability and professionalism. Regular government-led valuations every five years aim to keep official property records aligned with market dynamics, supporting public needs like taxation and urban planning.
II. Valuation Methods and Information
The Proclamation highlights flexibility in valuation methods. While the Sales Comparison Approach is preferred for active markets, it also allows other techniques like Income Capitalization (for income-generating properties) and the Cost Approach (for replacement value estimation). Access to accurate, current market data is vital for these methods to yield credible valuations.
III. Responsibility and Cost of Assessment
The Proclamation distinguishes between routine government-led valuations and special assessments requested by private parties. For special assessments, the requesting party covers the cost and retains the right to use the valuation for their purposes. Public-benefit valuations are conducted every five years and funded by the government. Final property valuations are submitted to city or district authorities for approval, ensuring alignment with broader policy goals.
IV. Role and Duties of Valuers
Valuers play a critical role in ensuring accuracy and integrity in the valuation process. Professional licensing requirements ensure that only qualified individuals can practice. A mandatory code of conduct upholds ethical standards like objectivity, confidentiality, and avoiding conflicts of interest. Every three years, valuers undergo assessments to maintain their licenses and keep up with industry developments. Misconduct, whether professional or ethical, is addressed by authorized bodies through actions such as suspension, confiscation, or other necessary measures.
V. Conclusion
Proclamation No. 1357/2024 introduces a comprehensive framework for real property valuation in Ethiopia. Its key strengths include clarity of purpose, emphasis on market-based valuation by certified professionals, adaptability in valuation methods, structured oversight, and professionalization of valuers. However, its success largely depends on the Regulations issued for implementation. These must provide precise definitions, details on valuation methodologies, standards for valuer certification, and processes for addressing misconduct. Consistent application and a strong regulatory body will be essential for achieving a stable, fair, and transparent real estate market in Ethiopia.
Read the full Proclamation here
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