On January 1, 2024, the second stage of land reform begins, allowing legal entities with Ukrainian beneficiaries to acquire agricultural land. However, the limit is no more than 10 thousand hectares per company.
The continuation of the reform caused a heated debate in the political and business environment; Delo.ua collected in one text.
The land market reform, which started on July 1, 2021, can be called long-suffering - in the original version, it was planned to allow both Ukrainian citizens and legal entities to purchase land. However, due to protests from some farmers, politicians and public organizations, a compromise version of the reform was agreed upon in 2021 - no more than 100 hectares “in one hand” for individuals from July 2021, and no more than 10 thousand hectares for legal entities with 1 January 2024.
Such a fuse was introduced to enable citizens to have time to purchase land plots during 2022-2023, and thereby carry out the initial redistribution of land before allowing large players from agricultural companies to enter the market.
Despite the popular myth, foreigners are not allowed to buy Ukrainian land in any case.
However, in the fall of 2023, doubts are spreading among Ukrainian politicians and the business community about the advisability of launching the second stage of the reform. It is proposed to postpone it for a certain period, or suspend it until the end of martial law in Ukraine, or prevent an increase in the hectare limit for legal entities.
Not allowing legal entities into the land market: arguments against
Party leader Yulia Tymoshenko in 2017 announced her intentions to collect 10 million signatures against the opening of the land market, but was unable to fulfill her promise. In 2020, the party initiated a referendum on the feasibility of selling farmland, but was unable to completely block the reform.
The party's struggle with the land market continues. As Yulia Tymoshenko stated, the Batkivshchyna faction convinced its parliamentary colleagues not to introduce the second stage of land reform from January 1, 2024. According to her, the leaders of parliamentary factions and Prime Minister Denis Shmigal agreed to develop a legal mechanism that would postpone the land issue until the end of the war.
It is not clear how the party will be able to block the opening of the land market for legal entities - this decision must be made by parliament, which will no longer meet in plenary sessions .
In addition to “Batkivshchyna”, it is also proposed to postpone the reform of the land market All-Ukrainian Agrarian Council (VAR). This the organization proposes not to increase the limit of land owned by one legal entity to 10 thousand hectares, and keep the current restriction in 100 ha both for citizens and legal entities.
VAR claims that as a result, Ukrainian farmers are experiencing perhaps the most difficult trials in the entire history of independence - they constantly suffer financial and physical damage due to blocked ports, the destruction of production facilities, shelling and mining of Ukrainian fields. In such conditions, domestic agricultural producers have been operating at a loss for two years now, so increasing the limit on land in one hand will not bring any practical benefit to small and medium-sized agricultural producers; they now simply do not have the funds to purchase agricultural land.
“Increasing the limit of agricultural land ownership, under current conditions, can only be beneficial to those companies that have the opportunity to obtain financing abroad, by attracting loans, issuing bonds, etc. – that is, a small number of agricultural companies. The remaining agricultural producers will remain deprived of this opportunity at least until the end of the war,” says the VAR’s appeal to the government and parliament.
Due to the difficult situation in the agro-industrial complex, 100 hectares until the end of the war and for another two years after the victory in one hand for both legal entities and individuals.
Also, the chairman of the VAR, Andrei Dykun, registered a corresponding petition with almost 26 thousand signatures, which, accordingly, should be considered by the president. In response, Vladimir Zelensky instructed Prime Minister Denis Shmygal to comprehensively study this issue, taking into account, among other things, possible risks to food security.
Small entrepreneurs also express dissatisfaction with the reform. For example, ATO veteran and active serviceman Taras Lelyukh asks President Vladimir Zelensky to protect Ukrainian villages by limiting the ability of legal entities to buy land of 10 thousand hectares in one hand. According to him, large agribusiness can buy agricultural land before small farmers, landowners and active military personnel can do so.
A somewhat less stringent initiative to limit the access of legal entities to the land market was submitted on December 21 by a group of people’s deputies led by Dmitry Razumkov. In the bill they registered №10366 it is proposed to delay the entry into force of the second phase of land reform for a year, until January 1, 2025. The reason for this delay is ensuring a more optimal land market model after the post-war stabilization of the economy, the authors of the document believe.
Reform must continue: arguments in favor
There will be no changes to the second stage of land reform, and from January 1, the land market will work for legal entities exactly as planned. The Minister of Agrarian Policy and Food of Ukraine announced this on December 12 Nikolay Solsky during the conference “Conducting agribusiness in Ukraine“.
“Starting the new year, we have a new stage of land reform. We are not planning any changes. This means that starting from the new year, legal entities can buy land,” Solsky emphasized.
Thus, the war encourages Ukraine to speed up reforms, rather than slow them down. The country should move towards business liberalization, rather than strict regulation - it is necessary to establish convenient rules, simpler than in other countries.
It should be noted that the ban on the purchase of land is valid only in six countries of the world - Venezuela, North Korea, Congo, Cuba, Tajikistan and Belarus.
An expert on land issues and agrarian economics, Oleg Nivevsky, harshly criticizes the initiative to stop land reform . He calls the activity of “Batkivshchyna” around the land issue an attempt at PR on a socially important topic.
According to him, only a liberal and well-functioning agricultural land market is the guarantee that farmers and landowners will have funds for development. Also, the launch of a land market for legal entities will have a positive impact on the country’s economy, since the start of the second stage of reform during the first three years after 2024 will provide an additional 1-2.7% of GDP annually. At the same time, the operation of the market only for private individuals will have a zero effect on the country’s GDP, which is what is currently observed.
The second stage of the land market will allow farmers to gain a foothold on their lands and develop a long-term business, which they did not dare to introduce on leased lands.
In addition to the launch of the agricultural land market for legal entities, the early launch of the Fund for Partial Guarantee of Loans in Agriculture, as well as the revaluation by the National Bank of the liquidity ratio of agricultural land as a subject of collateral, will allow attracting investments in the agricultural sector, adds Oleg Nivevsky.
The analyst emphasizes that only due to the existence of the land market in an incomplete format, the agricultural sector has already received an additional 200 billion UAH. collateral assets, which corresponds to UAH 70 billion. loans. During the full-scale war, the Russian Federation destroyed fixed assets in the agricultural sector for 320 billion UAH , that is, the market was able to somewhat compensate for the losses.
“When farmers say that because of the war they have no money, then the importance of the land market only increases, and it is necessary to improve its functioning, and not slow it down, as one of the agricultural associations suggests. This is a fundamental mistake and a misunderstanding of what the land market is for,” says the expert.
The largest agricultural association in Ukraine, UCAB, also advocates compliance with the format for the development of the land market, determined in 2020. Its inviolability is necessary both for Ukrainian agribusiness and for land owners and for the future investment attractiveness of agricultural land as an asset. There are no grounds for postponing the implementation of the second stage of the land market, notes UCAB.
CEO and co-founder of the land investment company “Tvoe Kolo” Andrey Usenko explains in a commentary for the publication: delaying the reform will have negative consequences for the Ukrainian economy. This means slowing down investments in the industry, freezing long-term projects for deep processing of agricultural products or building reclamation systems.
Opposing the development of the land market is the same as opposing the development of the Ukrainian economy.”
According to him, various government support programs can be an effective solution to ensure equal opportunities for small and medium-sized agricultural producers - from free grants for business development to government lending programs such as “5-7-9%”. In addition, it is important to launch the Fund for Partial Credit Guarantee in Agriculture as quickly as possible.
It is noteworthy that the “5-7-9%” program really works. According to the Ministry of Agrarian Policy, since the beginning of 2023, 13.1 thousand agricultural enterprises have received 70.9 billion . bank loans for development. Of these, the vast majority were financed under the state program “Available loans 5-7-9%” - 10.1 thousand agricultural enterprises for UAH 40.3 billion .
Also debatable is the issue of reducing profitability in the agro-industrial complex, which remains profitable even during the difficult years of the war. For example, before the full-scale invasion, farmers received very high profits for five years in a row; on average, an effective farmer earned $ 400 per hectare per year. If we take 2021, then in general there were excess profits - $1000/ha , thanks to which most farmers formed a reserve that will allow them to survive difficult times.
According to the expert, agricultural business cannot be planned for 1-2 years, you need to look 10 years ahead. If we think strategically, the potential for growth in the value of a hectare of agricultural land is 20% per year, while rent is 6-8% per year, and the loan - 6-15% depending on the currency. It's obvious that this is profitable, and farmers will attract credit funds to ensure the security of the land bank for the decade ahead.
Will it be possible to stop land reform?
No, from January 1, 2024, legal entities will be able to buy up to 10 thousand hectares in one hand, emphasizes People's Deputy from the “Golos” faction Yaroslav Zheleznyak .
“There will be no meetings of the Verkhovna Rada until the end of the year, so no one will change the format of the land market. Both the legal entity and the limit of 10 thousand hectares will all come into force on January 1, 2024. And then if we revise it, it will only be towards an increase... for example, up to 100 thousand hectares, as I will propose,” he wrote on the Telegram channel.
The second stage of the land market will definitely take place, says Andrey Usenko. Ukraine has already delayed the development of land reform for several decades. Further delay will further slow down the country’s development and make its agricultural sector less competitive. Fortunately, the Ministry of Agrarian Policy and other government offices are very aware of this and will not allow the reform to be disrupted.
The opening of the land market to legal entities will bring new players into this area: from farmers who will seek to expand their land bank or secure ownership of it, to large investment funds that will attract large capital, invest in land and further manage it. Previously, the activities of such funds were impossible due to the ban on land ownership for legal entities.
The demand for land has been gradually growing since the opening of the market, even during a full-scale war, recalls the CEO of “Tvoe Kolo”. The opening of the market to legal entities from January 1, 2024 will only increase the volume of investment in this market and will lead to higher prices. The introduction of the second stage of the reform will give the land market even greater transparency.
It can also be stated that Mass purchases of land, which opponents of the reform warned about, did not happen during these 2.5 years. Currently, a seller’s market has been formed in Ukraine, who decides whether to sell their land or not. Obviously, land owners have been extremely careful since the beginning of the reform, selling land in exceptional cases.
Demand forecast : “Your Kolo”, even before the full-scale invasion, selected 600 thousand hectares of the most investment-attractive agricultural land, which are located mainly in the Sumy, Chernihiv, Vinnytsia, Zhytomyr, Khmelnytsky, Poltava and Ternopil regions. While there is war in the country, maximum demand will remain in the central part of Ukraine, and after the victory it will be actively restored in the northern regions. 300 thousand hectares , or 1% of the country's entire land bank, will enter the land market annually
