Romanian land market effectively liberalized on Jan. 1, 2014

Under the Treaty of Accession to the European Union, Romania is bound to open its land market to EU citizens as of January 1, 2014, which will change the existing ownership regime that allowed only legal entities to buy land.

In order to restrict transactions with farmland, the Ministry of Agriculture initiated a bill that cleared Parliament on December 17, 2013, yet with some amendments, one of which refers to the removal of the pre-emption right for people up to 40 year old.

Thus, in the case of sales of farmland outside city boundaries, beginning 2014, the owners can sell under observance of the pre-emption right of individual co-owners, tenants, individual neighbours and the Romanian state. Under the new law, Romanian citizens, citizens of other EU member states, citizens of states that are parties to the European Economic Area Agreement (EEAA), stateless persons residing in Romania, in an EU Member State or a state party to the EEAA, as well as legal persons having the nationality of an EU Member State or of a state that is party to the EEAA will be allowed to acquire land outside city boundaries.

Agriculture Minister Daniel Constantin considers that the law addresses the needs of those living in rural areas.

The law also provides for the establishment of the Authority for Land Market Management and Regulation which will take over the activity, staff and assets of the State Property Agency and which will report to the Prime Minister.

According to the RO PAC Alliance, the bill on the sale and purchase of agricultural land by foreigners proposed by the Ministry of Agriculture amounts to a sort of "land expropriation", having rather the purpose of blowing into the sails of European speculators.

"Through incorporated companies, foreigners already hold in Romania between 1 and 1.2 million hectares of land, but so far we haven't seen foreigners effectively work these surfaces. It's still the Romanian farmers who do the tilling and the foreigners collect the subsidy provided by the EU. The output of this land does not enter the agricultural circuit either, but is directed to energy crops. ( ... ) The real disaster that grips the Romanian land market will be visible after the law is enforced," says RO PAC president and chairman of the Romanian Cattle Breeders Federation Claudiu Franc.

On the other hand, MADR representatives consider that this law also pursues the merger of agricultural plots into larger farms and the establishment of economically viable holdings, given that the agricultural middle class has no longer been offered support in recent years. Currently, 11,000 large-size farmers with over 30 hectares each hold a total of 4.5 million hectares and collect half of the subsidies, while 800,000 farmers have just between 1 and 5 hectares. Romanian farmers can take out loans with an interest of 6% for domestic lei from two banks to purchase agricultural land and can benefit from state guarantees on loans up to a limit of 50% for the same purpose.

Currently, about 8 % of Romania's arable land is used by foreigners who acquired farmland under the terms of the legislation in force or who have leased land under observance of the two limitations set forth in the Civil Code. Thus, individuals are required to reside in Romania, and legal persons or associations must be headquartered in Romania if they want to own or work land.

According to data of the Ministry of Agriculture and Rural Development (MADR), at the end of 2011 foreigners were holding more than 700,000 hectares of agricultural land in Romania, representing 8.5 pct of the country's arable surface. In a ranking of foreign land buys, Italy ranked first with 24.29 pct, followed by Germany with 15.48 pct and Arab countries with 9.98 pct.

Hungary accounts for 8.17 pct of the more than 700,000 hectares of land bought in Romania by non-residents, followed by Spain (6.22 pct), Austria (6.13 pct), Denmark (4.52 pct), Greece and the Netherlands (2.4 pct each) and Turkey (0.78 pct).

At present, the price of a hectare of farmland can start from 2,000 euros and can go up to 18,000 euros, but if the irrigation system is restored, these figures will shoot up towards the EU average of EUR 30,000 plus.

Romania has 13.298 million hectares of farmland of which about 9 million hectares are arable land.

(Agerpres/03.01.14)