The second stage of land reform has begun in Ukraine - from now on, agricultural land can be purchased not only by individuals, but also by legal entities - companies, banks, and territorial communities.
The government and expert circles believe that the sale of land will give impetus to the development of the agricultural sector and attract investment.
But as a result of the war, hundreds of thousands of hectares of land have been rendered unusable for many years to come or are located in occupied territories, so agricultural producers are suffering billions in losses.
Because of this, at the end of last year, there were calls to postpone the start of land sales to legal entities from January 1, 2024, to a later date. However, the parliament did not consider such proposals.
So what awaits the land market, which has been opened to companies after several decades of moratorium?
Revolution in the countryside
Since the beginning of Independence, the parliament has consistently voted to ban the sale of land. The law on the free circulation of agricultural land, adopted in July 2021, was, in fact, a revolution in the agricultural sector.
The Verkhovna Rada stipulated that at the first stage, only individuals and only citizens of Ukraine would have the right to purchase land. The law also established that the maximum amount of land that such an individual could purchase would not exceed 100 hectares.
The law prohibited the sale of state and municipal land and deprived foreigners of the right to purchase land. Such a right could be granted to foreign citizens (but not Russian citizens) only as a result of an all-Ukrainian referendum.
In peacetime, the free market operated for only seven months. It operated for almost two years in wartime.
Since January 1 of this year, legal entities created and registered by citizens of Ukraine have been granted the right to purchase land. They and individuals are now granted the right to purchase “in one hand” 100 times more land than during the first stage, namely 10 thousand hectares of agricultural land.
Land and war
Some politicians considered the war to be the reason why the second stage of land reform should be postponed to a later time.
In particular, former Parliament Speaker Dmytro Razumkov proposed postponing the start of land sales to legal entities until January 1, 2025.
Before the New Year, the Batkivshchyna party faction called for the 100-hectare limit to be left in "one hand" for both individuals and legal entities until the end of the war and for another two years after victory.
Party leader Yulia Tymoshenko stated the threat that large amounts of land “will end up in the hands of oligarchs, corrupt officials, and unprofessional owners,” who will be able to buy large plots of land, and farmers will not be able to withstand the competition.
There were also warnings from representatives of the presidential faction "Servant of the People".
Yulia Yatsyk, who was elected to parliament from the Zaporizhia region, which is almost completely occupied by Russia, emphasizes that millions of citizens will be deprived of the opportunity to exercise the right to purchase land. Because they are either under occupation, abroad, or in the Armed Forces, in addition, “millions of Ukrainians have changed their focus and directed their efforts not to running and expanding businesses (including agricultural ones), but to providing comprehensive assistance to the army.”.
However, the parliament did not consider all these proposals, so the sale of land to legal entities began.
Mined land
Another reason for proposing to postpone the second stage of land reform was the mining of hundreds of thousands of hectares of land that are unsuitable for agricultural needs and have a lower value for the owners.
According to the Ministry of Agriculture, in general, about 20% of land in Ukraine is unusable due to occupation, hostilities, and mining. This was recently stated by First Deputy Minister of Agrarian Policy Taras Vysotsky during a telethon.
"After de-occupation, it will take a lot of time to demine and clear the territories. What the occupier leaves behind will take at least several months, or even up to a year, to return to production," he emphasized.
According to Economy Minister Yulia Svirydenko, the cost of completely demining Ukraine could reach $50 billion.
However, according to Oleg Niv'evsky, founder of the Center for Food and Land Use Research at the Kyiv School of Economics (KSE), having received land, any owner, whether a farmer or a company, will be interested in demining it.
“Where the funds will come from is another question. They will either find opportunities themselves, or they will attract donors. Demining will be a very large-scale project, lasting for decades, so we should expect state, donor, and private funds,” he says in a comment to BBC Ukraine.
1% sold. Expectations of authorities and experts
In general, government officials and experts have quite optimistic forecasts regarding the prospects for land sales.
"Those who have been waiting for a long time will enter the market - legal entities that want to acquire land as their property in order to be able to develop long-term investment projects. This, of course, will lead to an increase in prices," says Deputy Minister of Agrarian Policy and Food Denys Bashlyk.
"After the market opens for legal entities, firstly, the number of potential buyers increases, while the number of those who want to sell land will remain unchanged. Therefore, demand will grow, and therefore the price will also grow," KSE expert Oleg Niv'yevsky tells BBC Ukraine.
KSE experts believe that as a result of the continuation of the land reform, the price of land will increase and in three years it may double in price, in 7-8 years - by 200% and reach the indicators of Ukraine's European neighbors, where land costs from seven to 11 thousand euros per hectare.
Today, the average price per hectare in Ukraine is 1-2 thousand dollars. According to the Ministry of Agriculture, the highest prices on the land market are recorded in Ivano-Frankivsk, Lviv and Ternopil regions.
KSE predicts that the land market for legal entities will add 1-2.7% of GDP annually over the next three years.
In the more than two years since the start of the reform, about 276 thousand hectares of agricultural land have been sold or donated. This is 1% of all agricultural land located in the territories controlled by the Ukrainian authorities.
Experts from the Kyiv School of Economics believe that despite the small percentage of sales, overall market performance is positive, as most of the time the market existed in wartime conditions. Despite this, the conclusion of purchase and sale agreements did not stop.
Skeptics who considered it inappropriate to begin the second stage of land reform are reminded by experts that the shadow land market has existed all along, and now it is important not to bring it back.
Svitlana Dorosh
