Romania is continuing to attract international investment in the agri sector. Whilst there are a number of challenges – economic for 2019 is strong at around 4% real GDP growth which together with Total Factor Productivity gains – is driving agricultural returns and therefore the land market.
Following the end of communism in 1989 – the restitution process which began in the early 1990’s gave land back to former owners dismantling the majority of co-operative state farms. Over 10 million hectares of land were eventually given back to 4 million beneficiaries creating a complex, fragmented land tenure system. In the 1990’s Romanian land law ensured that farmland could be sold regardless of the areas size, with the restriction that the property of the acquirer should not exceed 100 ha (arable equivalent) per family. In the late nineties this land law was amended increasing the upper limit to 200ha. Such legislation ensured there was a sufficient quantity of land for as many Romanian citizens as possible, severely restricting any opportunity of foreign investment or establishing large commercial farming entities.
It was not until April 11th 2014 that Romania’s legal framework saw a shift, allowing foreign investors to buy land in Romania without any restrictions. This provided the green light allowing the purchase of agricultural land by citizens of the European Union/European Economic Area or of the Swiss Confederation. This provided opportunities for investors to begin acquisitions of Romanian farmland.
This opening of the market, together with EU Membership – has had a major impact on land values. Hosting one of the most pronounced agrarian profiles in Europe with close to 9 million hectares of arable land, coupled with some of the lowest valued land has made Romania an attractive investment opportunity for some. However, the opportunity does not come without its challenges.
Previous land law ensured that vast areas of agricultural land were owned in small plot sizes by a number of individual citizens, and therefore purchasing a registered consolidated block of land as an investment has historically, been challenging. However, as work is being done to consolidate land, over an extended period of time (and this will be multi generational) – the supply side is beginning to improve. Consolidated land, more suitable for large scale commercial agriculture is increasing in value at a much faster rate, than small fragmented parcels. The market is effectively rewarding the land consolidation process.
Consolidated land value increase article to be published soon.
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