Farmland market liberalization comes with no restrictions for foreigners

Even though the prices for agricultural land in Romania have tripled since 2007, investors’ interest is continuously growing.

The January 1 liberalization will boost even more this demand, but the questions is how easy it will be for locals and foreigners alike to buy Romanian farmland depends on the way the future measure regulating sales is applied.

At the moment, there are no restrictions set for non-resident EU citizens looking to buy agriculture land in Romania as individuals, since the January 1 liberalization deadline, stipulated by Romania’s Treaty of Accession to the EU, kicked in and president Traian Basescu sent back to Parliament for re-examination a draft bill regulating the sale and purchase of farmland by individuals.

It will be at least one month before the bill could turn into a law and before that happens, foreign individuals will have the same rights as locals to buy farmland.

Local farmers are afraid of unfair competition from international buyers who have more means to buy land. The situation will be even more appealing for foreigners as the land prices in Romania are still below the rest of the EU.  A debate regarding foreign massive land acquisition came up after news emerged that Hungary is allegedly preparing a bid to buy land in Transylvania.

The draft bill proposed by the Romanian Ministry of Agriculture and Rural Development stipulates that co-owners, tenants, neighbours and other individuals involved in farming activities in the region where farmland is for sale and the state will have pre-emption rights to purchase the land that is up for sale. This came as the final version after a stricter bill was first proposed.  President Basescu objected to several unclear aspects and he added that the law should be drafted to allow foreign companies and individuals to buy Romanian farmland under the same conditions that Romanians can buy farmland in the EU.

 “We also believe that there are aspects of the bill on farmland that must be clarified before it is passed into law in order to avoid future difficulties in applying it,” Larisa Popoviciu, senior associate at Zamfirescu Racoti & Partners, told BR.

Other EU countries have established similar regulations regarding conditions under which farmland can be bought and worked by foreigners.

 “One can see that there is no common approach across the member states and there is more than one way to tackle this. Whatever the measures the Romanian state chooses to implement – be they making it mandatory for transactions to be approved by the authority or offering legal preemption to certain categories – these procedures must be carried out in a transparent manner and within a reasonable timeframe so that it doesn’t unnecessarily block the market,” she added.

Some say the fears for massive farmland purchases are exaggerated and prior to this date, foreign investor could very well purchase land through locally registered companies. According to recent data, approximately 8.5 percent of the country’s arable farmland is already controlled by foreigners.

Despite the liberalization, the demand for buying local farmland remains high, say market representatives. Many big buyers have invested in acquisition by setting up local companies, Razvan Iorgu, managing director at CBRE Romania stated.

“Local companies controlled by foreigners already own an estimated 1 million hectares of farmland in Romania and many of these companies have been present in Romania for more than ten years” Flavius Pop, consultant in the investments department of DTZ Echinox said.

At the moment, the price per hectare varies considerably, from under EUR 1,000 to as much as EUR 6,000 – EUR 8,000, according to Iorgu. The variation in price is triggered by soil quality, surface, area and the state of the plot. Even though prices continued to grow in the last years, they are still under the market price in the EU - about EUR 24,000 per hectare in the UK and Belgium, between EUR 15,000 and EUR 16,000 in Italy and as much as EUR 30,000 in Denmark.