*4.2.2 Plot acquisition mechanisms in the informal channel*

Peri-urban areas which used to be prime agricultural areas have also rapidly being converted into urban built-up property informally outside the official and the formal law. The actors in the informal settlement process use different modes of acquiring an informal plot of land from the informal market. The great majority of plots which is about 78% of the informal plats were bought illegally from the local peri-urban smallholding farmers who received the land for agricultural purposes. However, according to the land policy and legislations of Ethiopia, land is not salable property [13]. Some informal settlers also claim as if they have received the plot as a gift from relatives but in reality it was bought illegally. Speculators are also involving in the transaction and construction of informal houses with expectation of profit in the future and they involve in selling and buying of agricultural lands and then they convert into urban built-up property. So informal houses or urban built-up properties can also be built on plots bought from previous informal buyers with some profit. This study also shows that sub-standard houses or informal houses can be constructed by local peri-urban landholders themselves on their own agricultural field [23].

The analysis of the modes of acquisition of informal plots in the peri-urban areas shows that the largest proportion of the land occupied by informal settlers was previously held by local peri-urban farmers which destined to be used for agricultural purpose only. The action of local peri-urban landholders/farmers is against the constitutional provision that forbids land sale. As indicated above, the federal constitution of Ethiopia clearly states that all land is state property in which citizens enjoy only use rights without the right to sale [13]. Thus, peri-urban land holders play a double role in the informal urban built-up property formation process. On the one hand, they are primary suppliers of land to the informal market and on the other hand they are also playing a key role in the construction of unauthorized and sub-standard residential houses on agricultural fields without permission to do so. Their motive to construct unauthorized houses by the local landholders themselves on agricultural fields is partly due to their interest in capturing future land value increase resulted from the incorporation of the land into urban jurisdiction.

It is also important to see other factors that push local peri-urban landholders to involve in unauthorized subdivision of their agricultural fields into pieces of plots and later on to transfer it through sale and other mechanisms of transfer. The key pushing factor is their expectation that they would not be able to keep their land for long time in the future due to the rapid urban expansion into their area. The largest proportions of local peri-urban landholders feel that sooner or later the city administration would take their land for urban expansion programs through expropriation decisions. They have also a feeling that the compensation is not fair enough to cover what they loss and the whole process is not participatory. They have also a feeling that even the decided amount may not be paid on time. As a result, local peri-urban landholders on their side, by weighing the amount of compensation that they will be paid upon expropriation of the land and the sales price they are receiving by their own, prefer to sell the land.

**25**

*Urban Built-Up Property Formation Process in the Peri-Urban Areas of Ethiopia*

land informally and finally to convert it into a built-up property.

*4.2.3 Key aspects of negotiation and documentation process*

transaction would start.

The rural-urban dichotomy of land governance institutions is another favorable ground for the widespread practice of informal transaction of land in the transitional peri-urban areas. As a result of the urban rural dichotomy, the possibility of a power vacuum peri-urban zone to be formed is very high than any other geographic space. Most commonly power vacuum zone could be able to be formed when the municipalities adopt a revised master plan that includes the peri-urban areas into the urban center without expropriating and putting the land into its land bank. This power vacuum zone refers to a space neither under rural jurisdiction nor in the urban jurisdiction which in other words refers to a space under no one's jurisdiction. This is an excellent opportunity for local landholders to subdivide and sale their

The negotiation process of plot acquisition from the peri-urban areas through the informal channel involves various step by step carefully studied activities and decisions made mainly by the informal buyer so as to make the transaction safe and free from fraud. For the buyer, having accurate and reliable information about plot availability for sale and reliability of the seller are the preconditions for initial negotiation to be started between seller and buyer in the informal market. Focus group discussion with the brokers shows that information about the potential land sellers like reputation for good behavior and reliability are among the important issues that buyers want to know. It is only after the informal buyer has developed trust on the behavior and reliability of the seller that the process of negotiation for

Local peri-urban residents play a key role as information center for the newcomers who want to buy a plot of land from the area and to build unauthorized residential houses. Local residents are either the rightful local landholders themselves or informal settlers who came to the area some time earlier. Local residents also act as sub-brokers who supply information to the main brokers. Evidences from previous study show that the majority of informal settlers which is about 72% gained information about plot availability for sale from local residents while the remaining 28% of the respondents got information from brokers [23]. Therefore, the role of brokers in the negotiation and information diffusion process is so significant in the informal land market. They are the main diffusers of information about availability of plot for sale. Once they obtained information, they disseminate it by talking to everyone they meet. Land brokers, in the area, have a wide range of social interactions

through which they can get information about plot availability for sale.

considered in the price negotiation process.

After having sufficient information about plot availability by the buyer, the potential seller and the potential buyer come into a negotiation table by the support of mediators most commonly by brokers. Again after the potential seller and buyer are being introduced each other what follows is a process of bargaining by which each party tries to secure the best deal as much as possible. The central point of the negotiation is usually the price of the plot. In addition, plot size, location, and distance from public facilities like public road networks are some of the key issues

When the parties reach an agreement on the price of the plot, they end up by concluding a written agreement signed by both parties as part of documentation process. Traditional letter of agreement (contract of sale), locally known as "yemender wule," would be concluded between the parties as evidence of transaction at the presence of three witnesses who are locally known as "shemagelewoch." Traditional letter of agreement could be either contract of sale or loan agreement. The amount of money stated in the contractual agreement is

*DOI: http://dx.doi.org/10.5772/intechopen.86708*

### *Urban Built-Up Property Formation Process in the Peri-Urban Areas of Ethiopia DOI: http://dx.doi.org/10.5772/intechopen.86708*

The rural-urban dichotomy of land governance institutions is another favorable ground for the widespread practice of informal transaction of land in the transitional peri-urban areas. As a result of the urban rural dichotomy, the possibility of a power vacuum peri-urban zone to be formed is very high than any other geographic space. Most commonly power vacuum zone could be able to be formed when the municipalities adopt a revised master plan that includes the peri-urban areas into the urban center without expropriating and putting the land into its land bank. This power vacuum zone refers to a space neither under rural jurisdiction nor in the urban jurisdiction which in other words refers to a space under no one's jurisdiction. This is an excellent opportunity for local landholders to subdivide and sale their land informally and finally to convert it into a built-up property.

### *4.2.3 Key aspects of negotiation and documentation process*

The negotiation process of plot acquisition from the peri-urban areas through the informal channel involves various step by step carefully studied activities and decisions made mainly by the informal buyer so as to make the transaction safe and free from fraud. For the buyer, having accurate and reliable information about plot availability for sale and reliability of the seller are the preconditions for initial negotiation to be started between seller and buyer in the informal market. Focus group discussion with the brokers shows that information about the potential land sellers like reputation for good behavior and reliability are among the important issues that buyers want to know. It is only after the informal buyer has developed trust on the behavior and reliability of the seller that the process of negotiation for transaction would start.

Local peri-urban residents play a key role as information center for the newcomers who want to buy a plot of land from the area and to build unauthorized residential houses. Local residents are either the rightful local landholders themselves or informal settlers who came to the area some time earlier. Local residents also act as sub-brokers who supply information to the main brokers. Evidences from previous study show that the majority of informal settlers which is about 72% gained information about plot availability for sale from local residents while the remaining 28% of the respondents got information from brokers [23]. Therefore, the role of brokers in the negotiation and information diffusion process is so significant in the informal land market. They are the main diffusers of information about availability of plot for sale. Once they obtained information, they disseminate it by talking to everyone they meet. Land brokers, in the area, have a wide range of social interactions through which they can get information about plot availability for sale.

After having sufficient information about plot availability by the buyer, the potential seller and the potential buyer come into a negotiation table by the support of mediators most commonly by brokers. Again after the potential seller and buyer are being introduced each other what follows is a process of bargaining by which each party tries to secure the best deal as much as possible. The central point of the negotiation is usually the price of the plot. In addition, plot size, location, and distance from public facilities like public road networks are some of the key issues considered in the price negotiation process.

When the parties reach an agreement on the price of the plot, they end up by concluding a written agreement signed by both parties as part of documentation process. Traditional letter of agreement (contract of sale), locally known as "yemender wule," would be concluded between the parties as evidence of transaction at the presence of three witnesses who are locally known as "shemagelewoch." Traditional letter of agreement could be either contract of sale or loan agreement. The amount of money stated in the contractual agreement is

*Land Use Change and Sustainability*

*4.2.2 Plot acquisition mechanisms in the informal channel*

are not available.

agricultural field [23].

into urban jurisdiction.

ing by their own, prefer to sell the land.

area is inhabited mainly by low income households. Moreover, all house structures built in the area are sub-standard and temporary shelters constructed of muddy and wooden walls and roof of iron sheet scattered on the agricultural land and inhabited by low income households. Moreover, basic amenities such as school for children and other basic facilities such as electricity, road and sanitation services

Peri-urban areas which used to be prime agricultural areas have also rapidly being converted into urban built-up property informally outside the official and the formal law. The actors in the informal settlement process use different modes of acquiring an informal plot of land from the informal market. The great majority of plots which is about 78% of the informal plats were bought illegally from the local peri-urban smallholding farmers who received the land for agricultural purposes. However, according to the land policy and legislations of Ethiopia, land is not salable property [13]. Some informal settlers also claim as if they have received the plot as a gift from relatives but in reality it was bought illegally. Speculators are also involving in the transaction and construction of informal houses with expectation of profit in the future and they involve in selling and buying of agricultural lands and then they convert into urban built-up property. So informal houses or urban built-up properties can also be built on plots bought from previous informal buyers with some profit. This study also shows that sub-standard houses or informal houses can be constructed by local peri-urban landholders themselves on their own

The analysis of the modes of acquisition of informal plots in the peri-urban areas shows that the largest proportion of the land occupied by informal settlers was previously held by local peri-urban farmers which destined to be used for agricultural purpose only. The action of local peri-urban landholders/farmers is against the constitutional provision that forbids land sale. As indicated above, the federal constitution of Ethiopia clearly states that all land is state property in which citizens enjoy only use rights without the right to sale [13]. Thus, peri-urban land holders play a double role in the informal urban built-up property formation process. On the one hand, they are primary suppliers of land to the informal market and on the other hand they are also playing a key role in the construction of unauthorized and sub-standard residential houses on agricultural fields without permission to do so. Their motive to construct unauthorized houses by the local landholders themselves on agricultural fields is partly due to their interest in capturing future land value increase resulted from the incorporation of the land

It is also important to see other factors that push local peri-urban landholders to involve in unauthorized subdivision of their agricultural fields into pieces of plots and later on to transfer it through sale and other mechanisms of transfer. The key pushing factor is their expectation that they would not be able to keep their land for long time in the future due to the rapid urban expansion into their area. The largest proportions of local peri-urban landholders feel that sooner or later the city administration would take their land for urban expansion programs through expropriation decisions. They have also a feeling that the compensation is not fair enough to cover what they loss and the whole process is not participatory. They have also a feeling that even the decided amount may not be paid on time. As a result, local peri-urban landholders on their side, by weighing the amount of compensation that they will be paid upon expropriation of the land and the sales price they are receiv-

**24**

#### *Land Use Change and Sustainability*

usually greater than the real purchase amount with an intention to capture future increase in land value. The content of agreement also states that if the borrower could not pay back the loan within the agreed time, he/she agreed to convey his/ her piece of land to the lender in an exchange to the money borrowed. In addition, the content of the agreement contains a written description of the extent of the plot measured in meter or feet. Usually, elders of the village or leaders of traditional social institutions are often preferred as witnesses of transaction. The buyers and sellers receive copies of the agreement, and a third copy is made and kept by one of the witnesses of transaction.

However, the contractual agreements signed by buyers and sellers either in the form of sale or loan or mortgage transfers have no legal ground due to two main reasons. First of all it is not allowed to transfer land through sale in Ethiopia [13] and second of all, contracts of transaction should follow registration by public body as a formal requirement and recognition of transaction. But land transaction the peri-urban areas through the informal channel do not fulfill the requirements. The main purpose of documentation and contractual agreement in the informal market is to avoid conflicts in the future between buyer and seller. The transaction is mainly built on trust.

### *4.2.4 Plot demarcation and dispute resolution*

Plot demarcation and documentation will follow after the parties have reached in agreement on the price of the plot. The spatial extent of the plot can be demarcated by using visible markers such as poles plants, stone marks and fence. The spatial extent of the plots are demarcated and delineated by different actors involved in the transaction most commonly at the presence of three witnesses. Social norms like trust and reciprocity play a prominent role in the land transaction and regulation of the behavior of transacting parties.

As mentioned above the transacting parties in the informal market have no legal grounds and could not be able to take their cases to courts to seek justice in the formal judiciary system when dispute arises between the two transacting parties. The conflicting parties rather prefer to take their cases to the socially respected elders and leaders of "*idir*" and "*iqub*" in the village and the elders and leaders social institutions are quite efficient in solving such conflicts. When conflict arises the affected parties will take their cases to the elders in the village and the elders try to solve the problem by urging the conflicting parties to be governed by their agreement. If the parties could not be able to reach into agreement, they may face problems like being excluded from participating in different social affairs with the community. Moreover, traditional social institutions like "*ider* and *iqub*" play a significant role in making negotiations with government bodies claiming for formalization and organizing resistance against forced eviction. These institutions also provide the members (residents) an identity of belongingness to the area. It is only through these associations that the residents in this settlement area are recognized and registered as residents of the village.
