On 1 January 2024, the Ukrainian agricultural land market underwent expansion in line with the Law of Ukraine “On Introducing Amendments to Certain Legislative Acts of Ukraine Regarding the Terms of Agricultural Land Turnover”. This expansion represents a new phase, which broadens the list of eligible buyers. In addition to physical persons, Ukrainian legal entities (e.g. entities owned by Ukrainian citizens, the state and municipalities) were also permitted to purchase land, and are now able to accumulate up to 10,000 hectares instead of previous limit of 100 hectares.
Background
Ukraine introduced a moratorium on the acquisition of agricultural land in 2001, which resulted in a prohibition (with only a few exceptions) on disposing or changing the designated purpose of the majority of agricultural land.
After extensive discussions, this policy changed in March 2020 when the Ukrainian parliament approved the Law of Ukraine “On Introducing Amendments to Certain Legislative Acts of Ukraine Regarding the Terms of Agricultural Land Turnover”, which went into effect on 1 July 2021.
Moratorium cancellation
On 1 July 2021, Ukraine officially launched the agricultural land market. During the first stage, Ukrainian citizens were allowed to sell, buy and change the designated purpose of private agricultural land. The area allowed for individual land parcels was limited to 100 hectares. This restriction remained in place until the beginning of 2024 when the land market opened its doors to legal entities.
Banks were the only legal entities allowed to acquire agricultural land and that acquisition was only allowed through foreclosure. Banks, however, were required to dispose of this land within two years.
In addition, from the first days of the land market launch in 2021, lessees and subsoil users of land plots were granted a pre-emptive right to purchase agricultural land. If they were not eligible to acquire ownership of the land, they could transfer the right to purchase to a third party permitted to own land with an agricultural designated purpose.
Despite this limited opening of the market and a strictly defined list of possible owners, positive momentum was evident and the land market began to show signs of activity. The Ministry of Agrarian Policy and Food of Ukraine reported that in the first 20 months of the land market's operation, a total of 153,659 sale and purchase agreements were concluded. These agreements covered 344,000 hectares of the 40 million hectares of Ukrainian agricultural land previously under moratorium.
More buyers eligible to purchase larger areas of agricultural land
Beginning 1 January 2024, the land market entered a new stage. In addition to Ukrainian individuals and banks, Ukrainian companies owned by Ukrainian citizens, the state or municipalities can hold up to 10,000 hectares of agricultural land per company. Moreover, they can dispose of land or apply for a change in the designated purpose of this land.
The graphic below outlines these changes.
Restrictions
Ukraine continues to impose restrictions on the disposal of the state and municipal agricultural lands.
Furthermore, Ukrainian law also prohibits non-residents from acquiring agricultural land. If a company purchases land, notaries will play a crucial role in verifying if the acquirer is a foreigner or has foreign UBOs. For these purposes, a notary must do the following while certifying an agreement:
- request the documents from the acquirer; and
- verify on the Ukrainian unified state register of legal entities (i.e. the Ukrainian companies register), the individual entrepreneurs and public organisations.
In the event of a breach of these restrictions, law enforcement agencies will act. In 2023, prosecutors in the Khmelnytskyi region, relying mainly on documents from the Ukrainian State Migration Service confirming the foreign citizenship of the landowners, initiated legal proceedings to reclaim a total of 2,500 hectares of agricultural land for the state. Courts upheld such claims, citing the failure of foreigners to comply with the obligation to sell land within one year of acquisition.
Land market outlook for 2024 and beyond
Despite significant restrictions on foreign business, the outlook for the land market is positive. According to experts, even limited liberalisation will have a positive impact on market dynamics.
As of the beginning of 2024, the Ministry of Agrarian Policy and Food of Ukraine revealed that the average price for agricultural land is UAH 38,500 per hectare (EUR 900), reflecting a 10.4% increase from the previous year. In comparison to Poland or Romania, where the average price per hectare is EUR 10,000 and 15,000 respectively, Ukrainian agricultural land is relatively inexpensive.
Despite the current pricing, forecasts suggest a substantial increase in agricultural land prices in the coming years. The Kyiv School of Economics Agro anticipates that starting 1 January 2024, the land market could contribute an additional 1% to 2.7% to Ukraine’s annual GDP over the next three years.
For more information on the peculiarities of the land market in Ukraine, contact your CMS client partner or these CMS experts: Natalia Kushniruk, Oleksandr Protsiuk.
Links to law (in Ukrainian language): The Law of Ukraine “On Introducing Amendments to Certain Legislative Acts of Ukraine Regarding the Terms of Agricultural Land Turnover”.
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