CURRENT STATE OF LAND MARKET IN GEORGIA

ANALYSIS AND RECOMMENDATIONS

MARCH 23RD, 2013

About creating prerequisites for speeding up the registration of agricultural land and establishment of agricultural land market

Content
Brief history of land reform in Georgia Problem description Land Registration Program Positive impact of the land registration Methodology and cost of proposed solution

Brief history of land reform in Georgia

The reform of agricultural land in Georgia was launched in

1992; The reform was not built upon any conceptual basis, nor did it have any long-term vision of possible socio-economic outcomes; The government failed to establish mechanisms guaranteeing ownership rights; The state initially transferred some 760, 000 ha of land to the population; As a result of land privatization, the land parcels became extremely fragmented in Georgia; According to the Agricultural Census of 2004 by Geostat, 98% of plots are less than 5 hectares irrespective of use.

Relative frequency of parcel sizes in % of total

35.00% 30.00% 25.00%

20.00%

15.00%

10.00%

Frequency
5.00%

0.00%

Frequency of Parcel Size Under 5 ha by categories (%of Total)

100.00% 99.00% 98.00% 97.00% 96.00% 95.00%

94.00%
93.00% 92.00%

Brief history of land reform in Georgia (2)

In 1997, the process of creating formal mechanisms necessary

for establishing the land market and improving the legislation was launched; 1998 and 1999 should be considered as a turning point in the recognition of agricultural land ownership in Georgia; Within the period of 1999-2004 approximately 2.4 million ownership certificates were issued; In 2004 the GoG established the National Agency for Public Registry (NAPR); GoG further bolstered the process by adoption/amendment of laws governing land property issues in 2007; In 2008 KfW helped institutionalization of the cadastral system housed with NAPR; In 2011, the state terminated long-term lease agreements.

Problem Description
Lack of structured information on agricultural

land;
Complications related to those who have only

land ownership certificates but are not fully registered in accordance with NAPR;
Questionable legality of land ownership;

Land Registration Program

Argument #1 against registration program: The process

of agricultural land registration will be dealt by market mechanisms; Counterargument #1 in favor of registration program: The process will not be completed as rapidly by leaving it to the market alone as in the case of implementing an overall registration program. Argument #2 against registration program: The land reform in Georgia was implemented no worse than in any other country of the former Soviet Union and there is no need of further interference. Counterargument #2 in favor of registration program: that does not mean that there is no need of improving the results.

Land Registration Program (2)

Argument #3 against registration program: Given Georgias high poverty level among rural population, the formal registration of ownership on land may be unjustified; Counterargument #3 in favor of registration program: the establishment of land market will have a positive impact on its productivity and create additional jobs; Argument #4 against registration program: The process of registration program may be too costly and no investments are expected as parcels are small in size and scattered; Counterargument #4 in favor of registration program: formalization of land ownership rights is a necessary but not the only condition for the attraction of investments.

Costs needed for the land registration

Average size of farm in hectares 1.22

Average number of parcels per farm

Average size of parcels in hectares Average cost of registration per hectare (GEL)

2.33
0.52 407

Average size of land sold by the Ministry of Economy and average price paid per hectare (GEL)
Size in hectare Less than ha From 1 to ha From 2 to ha From 3 to ha From 4 to ha More than ha Average Amount Frequency 1 2 3 4 5 5 39 36 19 24 7 40 23.64% 21.82% 11.52% 14.55% 4.24% 24.24% 9.12 Sales price Less than 360 GEL GEL 360 - 720 GEL 720 1080 GEL 1080 1334 GEL 1334 1440 More than 1440 GEL Average Amount Frequency 12 31 51 38 0 33 7.27% 18.79% 30.91% 23.03% 0.00% 20.00% 1334.00

Positive impact of the land registration

 A well-formulated registration program should be

Methodology and cost of proposed solution

implemented, considering consolidation of land parcels; One of necessary objectives is preparation and implementation of agriculture development programs as well as resolution of environmental issues; Inventorying of all types of documentation; Framework program should be developed efficiently; Timeline of the program with corresponding costs should be drawn up and duties and responsibilities of main actors should be defined;

Methodology and cost of proposed solution (2)

Adequate amounts and technologies ensuring the

cheapest possible implementation of the program should be sought; State approach towards various forms of land ownership should be clearly determined; The legislation certifying the land ownership should be improved ; Implementation of the program should be launched in coordination with other program directions developed by the government.

Thank you very much for your attention Electronic version of the report is available at www.eprc.ge