Land Market Development and Small


Farms’ Access to Land in the Pre-





Accession Countries




Matej Bedrač, Sara Bele, Tomaž Cunder, Maja Kožar





Ljubljana 2018





Publikacija je bila pripravljena v okviru projekta“Land Market Development and Small Farms’ Access to

Land in the Pre-Accession Countries” (LMSF-AC), ki ga financira Regional Rural Development Standing

Working Group (SWG) in South-Eastern Europe (SEE).



Publikacija je dostopna na http://www.kis.si/Predstavitev_OEK/





Založnik:

Kmetijski inštitut Slovenije

Hacquetova ulica 17

SI-1000 Ljubljana

Tel.: 01 280 52 62

Faks: 01 280 52 55

www.kis.si





Ljubljana, 2018





Kataložni zapis o publikaciji (CIP) pripravili v Narodni in univerzitetni knjižnici v Ljubljani

COBISS.SI-ID=299077888

ISBN 978-961-6998-28-4 (pdf)





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





Table of Contents





1

Introduction

6

2

Work plan by key project activities

8

3

Methodological approach

9

3.1

Survey questionnaire ................................................................................................................9

3.2

Focus groups .......................................................................................................................... 10

4

General information about rental and sale markets in Western Balkans

11

4.1

Share of agricultural land by ownership structure ................................................................ 11

4.2

Share of uncultivated land ..................................................................................................... 13

4.3

Definition of small agricultural households ........................................................................... 14

5

Rental market in Western Balkans

18

5.1

Rented agricultural land......................................................................................................... 18

5.2

Informal rental market ........................................................................................................... 21

5.3

Rental prices and types of payment ...................................................................................... 22

5.4

Possible renters of agricultural land ...................................................................................... 24

5.5

Cross-country findings ........................................................................................................... 27

6

Sales market in Western Balkans

28

6.1

General information .............................................................................................................. 28

6.2

Sales prices ............................................................................................................................. 29

6.3

Possible buyers of agricultural land ....................................................................................... 30

6.4

Cross-country findings ........................................................................................................... 32

6.5

Rental market regulations ..................................................................................................... 33

6.5.1 General rental market regulations

33

6.5.2 Duration of rental contracts

37

6.5.3 Rental contract termination

38

6.6

Sales market regulations ........................................................................................................ 39

6.6.1 Sales prices

40

6.6.2 Changes of purpose of agricultural land

40

6.6.3 Property rights

41

6.6.4 Pre-emptive rights

42

6.6.5 Land taxes

44

6.7

Cross-country findings ........................................................................................................... 45

7

Agri-policy measures related to land market

47

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

7.1

Albania ................................................................................................................................... 47

7.2

Federation of Bosnia and Herzegovina .................................................................................. 48

7.3

Republic of Srpska .................................................................................................................. 49

7.4

Kosovo .................................................................................................................................... 50

7.5

The Former Yugoslav Republic of Macedonia ....................................................................... 50

7.6

Montenegro ........................................................................................................................... 51

7.7

Serbia ..................................................................................................................................... 52

7.8

Cross-country findings ........................................................................................................... 52

8

Agricultural credit market in Western Balkans

54

8.1

Albania ................................................................................................................................... 54

8.2

Federation of Bosnia and Herzegovina .................................................................................. 54

8.3

Republic of Srpska .................................................................................................................. 55

8.4

Kosovo .................................................................................................................................... 56

8.5

The Former Yugoslav Republic of Macedonia ....................................................................... 57

8.6

Montenegro ........................................................................................................................... 58

8.7

Serbia ..................................................................................................................................... 58

8.8

Cross-country findings ........................................................................................................... 59

9

Conclusions and recommendations

63

9.1

Albania ................................................................................................................................... 63

9.2

Federation of Bosnia and Herzegovina .................................................................................. 64

9.3

Republic of Srpska .................................................................................................................. 65

9.4

Kosovo .................................................................................................................................... 66

9.5

The Former Yugoslav Republic of Macedonia ....................................................................... 66

9.6

Montenegro ........................................................................................................................... 67

9.7

Serbia ..................................................................................................................................... 68

9.8

Cross-country conclusions and policy recommendations ..................................................... 68

10

References

71

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





Tables


Table 1: Key tasks, activities and deadlines within the LMSF-AC project as defined at the project

kick-off meeting (Minutes of … , 2017) ....................................................................... 8

Table 2: Share of agricultural land (ha UAA) by ownership structure for the last available year 13

Table 3: Share of uncultivated land in WB countries/territories (%) in relation to total agricultural

land ..................................................................................................................... 14

Table 4: Rented agricultural land: number of transactions in the last available year (expert

estimations, except AL, BiH (FBiH), BiH (RS), KO, MAC) ............................................. 20

Table 5: Rented agricultural land - transacted area (ha; expert estimations except AL, BiH (FBiH),

BiH (RS,) KO, MAC) ............................................................................................... 21

Table 6: Share of informal rental contracts (%); expert estimations ..................................... 22

Table 7: Average rental prices (EUR/ha) of agricultural land in the last available year ............ 24

Table 8: Possible renters of agricultural land (expert opinion) in WB countries/territories ........ 26

Table 9: Possible receivers of subsidies in case of renting agricultural land in WB

countries/territories ............................................................................................... 26

Table 10: Average sale prices of agricultural land (EUR/ha; expert estimations except FBiH, MAC,

RS) ..................................................................................................................... 30

Table 11: Possible buyers of agricultural land (expert opinion) in WB countries/territories ....... 30

Table 12: The duration of rental contracts in WB countries/territories (years) ........................ 37

Table 13: Assessment of the possibility of a farmer to obtain a loan in comparison with big farms

or other rural-based small firms .............................................................................. 60

Table 14: Most common reasons for rejecting credit applications in WB countries/territories ... 61

Table 15: Typical conditions of agricultural credits in WB countries ....................................... 61





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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





1 Introduction


This publication is the final deliverable of Agricultural Institute of Slovenia (AIS) within

the project “Land Market Development and Small Farms’ Access to Land in the Pre-

Accession Countries” (LMSF-AC). The project was initiated in order to strengthen the

understanding of the functioning of land market in the Western Balkan (WB)

countries/territories and its implications for small farm households’ access to land.

LMSF-AC project is funded by the European Commission Joint Research Centre (JRC)

and The Regional Rural Development Standing Working Group (SWG) is responsible for

its implementation. Project started on November 6th and will terminate on August 27th

2018. The WB countries/territories relevant for this project are Albania, Federation of

Bosnia and Herzegovina, Republic of Srpska, the Former Yugoslav Republic of

Macedonia, Kosovo1, Montenegro and Serbia2.



Key aims of the study were to collect information and data about rental and sale markets

and rental and sale market regulations in the WB countries/territories, to conduct

focused group discussions with relevant stakeholders in order to identify factors

affecting the functioning of land market (including informal norms) with special focus

on small farm households’ access to land and to analyze the implications of formal

regulations and informal norms on small farm households’ access to land.

The project objectives were achieved by completing the following tasks:

 Task 1: Collect information about rental and sale land markets in the WB

countries/territories;

 Task 2: Collect information about the land market policy and regulations in the

WB countries/territories;

 Task 3: Conduct focused group discussion with relevant stakeholders to identify

factors affecting the functioning of land markets and small farms’ access to land

in the WB countries/territories;

 Task 4: Provide a comparative cross-country analysis of the land markets and

small farms’ access to land in the WB countries/territories.



The key aim of the Task 1 was to make an overview of the land market development in

WB countries/territories and to assess the availability and quality of data on the rental

and sale land markets. The focus was to identify the availability of land rental and sale

prices, type and duration of rental contracts, importance of land abandonment and





1 This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the

ICJ Opinion on the Kosovo declaration of independence.

2 Abbreviations: Albania (AL), Federation of Bosnia and Herzegovina (BiH-FBiH), Republic of Srpska (BiH-

RS), Kosovo (KO), the Former Yugoslav Republic of Macedonia (MAC), Montenegro (MN), Serbia (SR),

Western Balkans (WB).

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

structure of land use, ownership and land fragmentation in the region with the help of

a survey questionnaire.



The main aim of the Task 2 was to collect information about land rental and sale market

policy and regulations in the WB countries/territories. The primary focus in the first part

of Task 2 was given to general land policy regulatory framework and rental market

regulations such as: rental price regulations, conditions for rental contract renewal and

termination, minimum/maximum transacted area and eventual public subsidies or

measures for land purchasing and/or renting. In the second part of the Task 2,

information about sales price regulations, pre-emtive rights rules, minimum/maximum

size of transacted/owned agricultural area, land ownership registration arrangements,

enforcement of land ownership rights and inheritance rules was collected.



The main aim of the Task 3 was to conduct focus group discussions with farmers,

farmers’ associations and other relevant stakeholders in order to identify factors

affecting the functioning of land markets and small farm households’ access to land.



The main aim of the Task 4 was to provide a comparative cross-country analysis of the

land markets and small farms’ access to land in the WB countries/territories, based on

the findings from project Tasks 1, 2 and 3. During this task, AIS evaluated the impact

of formal and informal land market regulations on small farms’ access to land, conducted

cross-country analysis of factors constraining and factors stimulating farmers’ exit from

agriculture, evaluated the implications of land abandonment for small farms’ access to

land and drew conclusions and policy recommendations.



This publication summarizes the key results and findings of project tasks described

above. The covered topics in the Tasks 1 and 2 are the following: general information

about agricultural land market, land market regulations, agri-policy measures related

to land market and agricultural credit market in WB countries/territories. Additionally,

findings of the Task 3 are incorporated into the results of Tasks 1 and 2, and under the

Task 4 cross-country analysis is presented for each topic. The structure of this

publication is the following: firstly, it provides a short overview of the project’s work

plan and methodological approach. In the second part of the publication, an overview

of results of Tasks 1, 2, 3 and 4 is presented, based on the respondents’ answers and

findings of the focus groups. The publication ends with conclusions and policy

recommendations.



It should be emphasized that the size structure of agricultural holdings in the WB

countries/territories is extremely unfavorable. The vast majority of agricultural holdings

in these countries are small, therefore the findings and results presented in this

publication refer to the most of the farms in these countries/territories.



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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

2 Work plan by key project activities



Detailed work plan was defined at the kick-off meeting in Skopje, December, 14-15th

2017. Below are the key project activities, deliverables and deadlines of the project,

divided by individual tasks (Table 1).



Table 1: Key tasks, activities and deadlines within the LMSF-AC project as defined at

the project kick-off meeting (Minutes of …, 2017)





Task


Activity/Deliverable





Deadline


Organization of kick-off meeting (scope of work, research questions, 14-15

work plan, methodology)

Dec’17

1, 2

Completed questionnaires including:

31 Jan’18

 Collected information about rental and sale market

developments in the WB countries/territories

 Collected information about rental and sale/ownership

market regulations

Identified implications of land market regulations for small farm

households

3

Methodology (templates and guidelines) for focused group discussion 31 Jan’18

with relevant stakeholders to identify factors affecting the functioning

of land markets and small farms’ access to land in the WB countries

1,2

Input to the first draft interim report to SWG (results of Task 1 and

9 Mar’18

2, outline for Task 3 and 4), including templates for the country

reports

3

Conduct focused group discussions with farmers, farmers’ Mar’18

associations and other relevant stakeholders in order to identify

factors affecting the functioning of land markets

1, 2, 3

Submit country reports including summary of rental and sale market 31 Mar’18

developments in each WB country/territory, rental and

sale/ownership market regulations and their implications for small

farm households and factors affecting the functioning of land markets

(based on the country report template provided by the SR)

1, 2, 3, 4 Interim meeting (discuss interim report, improve Task 1, 2 and 3, 11 May’18

plan Task 4)

1,2,3,4

First draft Final Report (results of Task 1, 2, 3, 4), including 7 Jul’18

development of a comparative cross-country analysis of the land

markets and small farms’ access to land in the WB countries

1, 2, 3, 4 Final meeting (discuss Task 1, 2, 3, 4)

20 Aug’18

1, 2, 3, 4 Final report and Databases

27 Aug’18





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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





3 Methodological approach


The survey was conducted with the help of a questionnaire template and focus group

discussions among WB countries/territories. All of the findings, conclusions and

recommendations, presented in this publication, were gathered based on these two

methods. In order to ensure uniformity of the collected information, the international

experts (Agricultural Institute of Slovenia, AIS) developed methodology, coordinated

and provided feedback and approval on the scientific quality regarding the collection of

data. A questionnaire template was sent to the national experts engaged by SWG to fill

in with relevant information from their countries/territories. Questionnaires were sent

to project partners from 7 WB countries/territories: Albania, Federation of Bosnia and

Herzegovina, Republic of Srpska, the Former Yugoslav Republic of Macedonia, Kosovo,

Montenegro and Serbia. Respondents were national experts from different institutions

(universities, institutes, colleges, ministries, etc.) who provided answers for their

countries/territories. In total, 13 experts completed the survey questionnaire. The

information was collected from national statistical offices, ministries of agriculture and

other public institutions dealing with land policy, international organizations (e.g. the

World Bank, FAO), additional surveys as well as expert and scientific literature.



To ensure uniformity of the focused group discussions, AIS developed methodology by

preparing instructions for organization of focus groups and specific questions for focus

group discussions that were also sent to project partners. In each WB country/territory

2 focus groups in different regions were conducted, each attended by relevant

stakeholders. In focus groups the same 4 general topics as in survey questionnaires

(information about rental and sale markets, land market regulations, agri-policy

measures related to land market and agricultural credit market) were discussed, but the

questions were more in-depth and more with an emphasis on small farms.



Based on the work done on project’s Tasks 1-3 (returned questionnaires and focus group

reports) and the inputs received from the national experts, a comparative cross-country

analysis of the land markets and small farms’ access to land in the WB

countries/territories was developed. Qualitative and quantitative analysis was enabled

by using uniform survey questionnaire and country report templates. First, the quality

of collected data was evaluated and if needed, feedback was provided to the national

experts. All of the data and information from Task 1-3 were gathered and processed

and lastly, comparative cross-country and desk top analyses of the land markets and

small farms’ access to land were conducted. Because of the large volume of gathered

data and information, not all of it is presented in this publication.





3.1 Survey questionnaire


Survey questionnaire template was sent to respondents (national experts) on December

21st 2017. The questionnaire was structured as follows (complete questionnaire is

attached in

):

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 Respondent information;

 Information about rental and sale land markets;

 Land market regulations;

 Agri-policy measures related to land market;

 Agricultural credit market;

 Any other additional information.

Respondents were asked to complete the survey questionnaire by January 31st 2018.

Additionally, some external resources and publications were reviewed where further

information was required. Filled-in questionnaires and follow-up answers were sent to

JRC in a separate document.





3.2 Focus groups


Instructions for focus group discussions within the Task 3 were sent to national experts

in January 26th 2018 and followed by specific questions and other materials (list of

participants, consent forms) in February 28th 2018. Focus groups were conducted in

March 2018 in all 7 project partner countries/territories. The aim of the focus groups

was to highlight additional more in-depth questions that were relevant in order to

identify factors affecting the functioning of land markets and its implications for small

farm’s access to land. Two focus groups were conducted in each partner

country/territory and facilitated by the national expert from the respective

country/territory.



Focus groups were composed of 7-19 participants that included farmers, farmers’

associations and other relevant stakeholders from SWG, scientific institutions, local

municipalities, banks, directorates, development agencies and other institutions on

national, federal, cantonal or municipality level.



Participants discussed about specific questions (attached in Napaka! Vira sklicevanja

ni bilo mogoče najti. ), divided into 4 general topics:

 Rental and sale markets;

 Land market regulations;

 Agri-policy measures related to land market;

 Agricultural credit market.



National experts could also add their own questions, if necessary to stimulate the

discussion. After focus groups were completed, the key ideas that were discussed were

summarized and included in country reports that were sent to SWG and AIS. Complete

instructions regarding the organization of the focus groups are attached in the annex

(Napaka! Vira sklicevanja ni bilo mogoče najti. ).

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

4 General information about rental and sale markets





in Western Balkans


Respondents were asked to provide data and information about land market functioning

in their country/territory and about the biggest obstacles that impede land market

development. They were also asked to describe institutions that are responsible for land

market issues and their role, provide data about the share of agricultural land based on

owner structure and the share of uncultivated land, describe how the quality of

agricultural land is assessed in their country/territory and provide the definition of small

agricultural households.



4.1 Share of agricultural land by ownership structure



Land privatization in Albania occurred early in the transition process, with the land

reform in 1991. During privatization process, the former collective farms were divided

into thousands of agricultural holdings (approximately 480,000). Around 383,000

families received about 500,000 ha from the former cooperatives. In total, land reform

programs have subdivided the country into 4.5 million land parcels and separately

owned immovable property units, which has left land ownership highly fragmented

(Albania country report, 2006). In 2013, utilized agricultural area (UAA) covered 1.16

million ha, which is around 40% of the total land area of the country. About half of the

UAA represents arable land, around 40% is permanent grassland and the rest of the

land is under permanent crops. Pastures and meadows are mostly state managed and

only partly given to farmers for rent (Policy brief, 2015).



In the Federation of Bosnia and Herzegovina, state-owned agricultural land is

mostly composed of pastures (73%), while arable land for intensive agricultural

production is mostly owned by family farms. The share of state owned land strongly

varies between different cantons (7% - 64%). In 2016 family farms owned 794,000 ha

of UAA, out of which 675,000 ha were estimated to be owned by small farms (up to 2

ha of agricultural land). It must be noted that UAA (1,179,000 ha) in the table below,

covers cultivable area (covering arable land, gardens, orchards, vineyards, pastures and

meadows), fishponds and swamps). Agricultural land is very fragmented into large

number of small land plots, and the existing Inheritance Law will in future lead to its

further fragmentation. As no agricultural census was conducted for the last 35 years,

there is no reliable data on number and size structure of agricultural holdings.



In the Republic of Srpska, there is also no precise and reliable data about agricultural

land surface and ownership. Data about ownership structure is published only for family

farms and legal entities. In 2016, family farms owned 98% (984,000 ha) of UAA and

other 2% (20,000 ha) belonged to agricultural companies. There is no data on how

much of agricultural land is owned by the state and how much of it is privately owned.

One part of state land is owned by companies in full or major ownership of the state

(former "kombinats" and other socially-owned forms of enterprises), and the second

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

part is land that is directly owned by the state. The land owned by state companies

shares the fate of these companies and changes owners as a consequence of the change

in the ownership structure of these companies (privatization, recapitalization, sale,

etc.). The agricultural land owned by the state is managed by the entity, through the

entity's Ministry of Agriculture. The third group of agricultural land is cooperative land.

Cooperatives have two categories of agricultural land. The first is the land that the

cooperatives have bought in the past. The second is the land used by the cooperatives,

assigned to them after the processes of private land nationalization and confiscation.



For Kosovo, bipolar farm structure is characteristic. The majority of UAA in 2014

(413,635 ha) was owned by small household farms and few large former state (socially-

owned) enterprises. In addition to the bipolar farm structure, agricultural land used by

private agricultural households is fragmented into several small plots, which are

distributed in many locations. The largest area of UAA belongs to permanent grasslands

(54%) followed by arable land (44%), permanent crops has less than 2% and the rest

refers to the kitchen gardens (0.3%).



The transition process in the Former Yugoslav Republic of Macedonia has given rise

to major structural and economic changes. Before 1991, the agricultural sector

consisted of largescale socially owned farms, also known as agrokombinats and

cooperatives, which were characterized by more specialized production. Today,

decentralization has led to the agricultural sector being composed of small farm

households with more diversified production systems, implying that small-farm

households, for which half of them are smaller than 1 ha, represents the agriculture.

Larger farms (agricultural companies) represent around 1% of the total farmer

population and they cultivate around 10% of the total arable land. Around 80% of

agricultural land is private, while the remaining 20% belong to the state.



Agricultural holdings in Montenegro, cultivate over 220 thousand hectares of UAA. The

great majority belongs to family farms (96%) while the rest is owned by agricultural

companies.

There is no statistical data on the agricultural land owned by the state. However,

agricultural producers use state-owned pastures and meadows for agricultural

production. Pastures and meadows in Montenegro constitute about 95% of the used

agricultural land, as the purpose of large area of arable land was changed. As in other

WB countries/territories, agricultural land is very fragmented.



In Serbia, the highest share of agricultural land in 2012 belonged to family farms (82%

of total UAA), which represent 99% of total agricultural holdings. Out of agricultural land

that belongs to family farms, around 10% belonged to small family farms (owning up

to 2 ha of agricultural land). The rest of agricultural land was owned by agricultural

companies and the state. The size of state-owned agricultural land varies year to year.

According to Republic Geodetic Authority, there was about 1 million ha of state-owned

agricultural land in 2017.



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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 2 shows the shares of agricultural land by ownership structure for the last

available year in hectares of utilized agricultural area. Some data is missing due to

unavailability of official statistics.

Table 2: Share of agricultural land (ha UAA) by ownership structure for the last available

year





BiH


Country/territory





AL


(FBiH)

BiH (RS)

KO

MAC

MN

SR

Data for year

2013

2016

2016

2014

2016

2010





2012


Owned by the state

598,000

385,000

n/a

17,038

n/a

n/a 800,0003

Owned by

agricultural

n/a

n/a

20,000

8,206

48,748

8,573

612,355

companies

Owned by family

561,520

794,000

984,000

405,429

271,988

212,724 2,825,068

farms

Owned by small

family farms (up to 2

n/a 675,0001

n/a

n/a 131,8162

n/a

273,622

ha of agricultural

land)

1,159,52 1,179,00 1,004,00

3,437,42

Total UAA

0





0


0 413,6354

320,738 221,298





3


1 Estimation made on the basis of data from Register of farms

2 Agricultural holdings with up to 3 ha of UAA

3 Period 2012-2015; only the area of rented state land is included in total UAA

4 Owned by family farms and Owned by agricultural companies

n/a – not available





4.2 Share of uncultivated land


Based on respondents’ answers in Table 3, share of uncultivated land strongly varies

between the surveyed countries/territories. The share is the lowest in Kosovo (4%) and

the highest in Montenegro (28%). For Federation of Bosnia and Herzegovina and

Republic of Srpska, the percentage of uncultivated land was provided in relation to total

arable land and was then calculated in relation to total utilized agricultural area. For

Albania, there are no official data on the share of uncultivated land, only estimations

from studies are available (10%) (Deininger et al, 2013). Countries reported that major

reasons for uncultivated land (not ordered by significance or frequency of answers) are

inaccessibility, lack of irrigation access, high steepness, low fertility, economic

inefficiency and weed infestation.



August 2018 I 13





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 3: Share of uncultivated land in WB countries/territories (%) in relation to total

agricultural land



BiH





AL


(FBiH)

BiH (RS)

KO

MAC

MN

SR

Data for year

2008

2016

2016

2014

2016

2010





2012


Share of uncultivated


land (%)

101

172

262

4

7

28

11

1 Estimation

n/a – not available



4.3 Definition of small agricultural households



Because the focus of this study is small farms, it is important to know, which farms are

actually considered as small farms. There is not uniform definition of a small agricultural

holding at European level. According to the Report on the future of small agricultural

holdings (EC, 2014), the most popular and at the same time most incomplete definition

is based only on the area criterion, i.e. the utilized agricultural area (UAA). It is thus

generally assumed that small agricultural holdings are those of less than 2 or 5 ha UAA.



The average size of agricultural holdings varies between WB countries/territories and is

on average very small (Table 4). The largest farms are in Serbia with above 5 hectares

of UAA per holding and the smallest are in Albania, where the average size is 1.2

hectares of UAA per holding. Data for Federation of Bosnia and Herzegovina and

Republic of Srpska are missing, since no agricultural census was conducted in few

decades. None of the surveyed countries/territories has its own official definition of small

agricultural holdings.



Table 4: Average size of agricultural holding in WB countries/territories (ha) in UAA



BiH





AL


(FBiH)

BiH (RS)

KO

MAC

MN

SR

Data for year





2012


n/a

n/a

2014

2016

2010





2012


Average size (ha)

1.2

n/a

n/a

3.2

1.8

4.6

5.4





In Albania, farms are very fragmented. The average farm size in 2012 was 1.2 ha and

the average plot size was 0.26 ha (INSTAT 2012). Family farms are the most common

type of farms, ranging from semi-subsistence with only family workers, to much larger

and more productive farms. In Albania, there are no official definitions of farms

according to their size. Some studies (Guri et al 2015) recognize small farms as those

smaller than 1 ha. However, according to classification used by INSTAT and MARDWA,

large farms are considered those with:

 ≥ 10 ha – the case of agriculture farms;

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 ≥ 8 heads of cattle;

 Small ruminant > = 150 heads of sheep and/or goats.



In the case of livestock, according to law (Law 9426 on…, 2005), cattle farms are

classified as:

 Large agricultural farms that breed over 50 dairy cows on a daily basis;

 Medium farms that breed 10 to 50 cattle;

 Small farms that breed less than 10 cattle.



According to these classifications, a very small share of farms can be considered as

large. Based on data from 2012, about 45% of the farms owned up to 1 ha and 86 %

of farms had up to 2 ha. Only 14% of farms were bigger than 2 ha and 1 % was bigger

than 10 ha. In the case of livestock, in 2011, only 2% had more than 5 cows and only

1% had more than 10 cows. In the case of small ruminants, 15% of farms had more

than 50 sheep, and 4% had more than 100 heads (MAFCP, 2012). The situation is similar

also for goat farms.



In the Federation of Bosnia and Herzegovina, small agricultural households usually

refer to households with less than 1 ha of agricultural land and with orientation to

subsistence or semi-subsistence farming. According to the last population and

household census in 2013, 30% (217,061) of all households declared themselves as

agricultural producers. But, according to the Farm register, in 2017 there were only

74,050 (34% of all agricultural households) registered farms eligible for support from

the Ministry. The share of farms with less than 1 ha of agricultural land among them

was 67%, while the share of farms bellow 3 ha was 89% of all registered farms.



In the Republic of Srpska, agricultural holdings are not categorized by size, but only

as commercial or non-commercial. Every agricultural holding engaged in agricultural

production is treated as an agricultural holding, without any other minimal requirements

for the registration and getting a status. The threshold for obtaining status of

commercial agricultural household is 3 production units. The number of production units

is determined by multiplying the volume of output generated by the types of agricultural

production and types of livestock, with the corresponding coefficient that is prescribed

by the regulations. For example, the limit for the status of commercial farm is 0.75 ha

of apples or pears, 1 ha of mercantile potatoes, 8 ha of mercantile maize, 12 ha of

mercantile wheat, 25 ha of natural meadows, 3 cows, 30 sheep, etc. All farms that have

fewer crops or animals are non-commercial.



In Kosovo, Agricultural household is the one that possesses and cultivates more than

0.10 ha of utilized arable land or less than 0.10 ha of utilized arable land, but has at

least:

 1 cattle and a calf, or 1 cattle and 1 heifer;

 1 cattle and 2 grown sheep or goats;

August 2018 I 15



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 5 grown sheep or goats;

 4 grown sheep and pigs together;

 3 grown pigs;

 50 grown poultry;

 20 beehives;

 More than 20 m2 of fish pond.

The average size of agricultural holding in Kosovo in respect to UAA is much smaller

than in most of the EU countries, but similar to the neighboring countries. The holdings

with 0-0.5 ha of arable land are most common (35.3%), while the most of arable land

is cultivated by agricultural holdings, with 2-5 ha of arable land.



In the Former Yugoslav Republic of Macedonia, agricultural holdings must meet the

following requirements:

 1000 m2 of agricultural area or more;

 Less than 1000 m2 of agricultural area or none at all, but own a certain minimum

number of livestock, poultry or beehives:

 1 cow and 1 calf, or

 1 cow and 1 heifer, or

 1 cow and 2 adult heads of small livestock, or

 5 adult sheep or goats, or

 3 adult pigs, or

 4 adult sheep or goats and pigs together, or

 50 head of adult poultry, or

 20 beehives.

As an exception, the households that have agricultural production, but do not meet the

requirements to be individual agricultural holdings, if agricultural production is the only

source of income for those households, are also covered.



The size of agricultural holdings is mainly measured by their economic size using the

FADN methodology. Very small farms are those with an output lower than 2,000 EUR

(60% of farms), small farms those with an output between 2,001 and 8,000 EUR (20%

of farms) and medium farms are those with an output higher than 8,001 EUR. In terms

of a land size, it is very difficult to generalize the definition of small agricultural holdings,

since different agricultural production requires different land size for efficient and

profitable production. However, the situation in terms of area per farm is similar to the

economic sizes. Around 50% of the farms have less than 2 ha of UAA, around 30% have

2 to 5 ha of land per farm, and only 5% have more than 15 ha per farm. In summary,

the Macedonian individual households are very small in size (on average, 1.8 ha of

utilized agricultural area).

August 2018 I 16



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries



Montenegro does not have a basic definition of a small agricultural holding even on

the basis of standard output, but since almost 65% of agricultural producers are below

2000 EUR of standard output, based on respondent’s estimation this is the line between

large and small agricultural producers. Secondly, according to the regulation on the

criteria for determination of small quantities of primary products and local markets,

small agricultural producers are those who produce:

 350 egg pieces per week;

 100 liters of raw milk per day;

 100 kilograms of cheese, whey, sour cream or kajmak per week;

 300 kilograms of fruits, vegetables or cereals per day;

 100 kilograms of processed products fruits, vegetables and cereals per week.

No data on the minimum requirements for agricultural holding is available.



Although there is no official definition in Serbia, the Strategy for Agriculture and Rural

Development of the Republic of Serbia 2014-2024 defines small farm households as

those that own up to 2 ha, i.e. up to 5 ha of UAA. Agricultural holdings using up to 2 ha

of UAA are the most common. Their share is around 50% of total number of agricultural

households, but they own only up to 10% of total UAA in the country. Agricultural

holdings that use less than 5 ha of UAA account for 77.7% and they own about a quarter

of total UAA. Small property is usually possessed by poor agricultural holdings,

“returnees” from cities (more often elderly, retired persons) and inhabitants of rural

areas with regular income from the non-agricultural sector. In Serbia, agricultural

holding, as defined in Agricultural Census 2012, is a holding which:

 Has minimum 50 acres of UAA or less than 50 acres of UAA if farmer engages

with agricultural production intended for the market or;

 Raises no less than two heads of cattle or one head of cattle and 2 heads of small

animals (pig, goat, sheep - in total) or five heads of sheep or 5 heads of goat or

three heads of pig or four heads of small animals / pig, goat, sheep - in total or

50 heads of poultry or 20 colonies of bees.



August 2018 I 17





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

5 Rental market in Western Balkans



Respondents were asked to provide the data about the share of rented agricultural land,

share of informal rental contracts, how the rental prices of agricultural land are formed

and how they vary with land characteristics (quality, category, location, natural

conditions), who gets the subsidies in case of renting agricultural land, what are the

rental prices (average, minimum and maximum price) of agricultural land and most

common types of rent payment.





5.1 Rented agricultural land


In Albania, rental and sale market are still poorly developed. A main problem lies in

terms of the land tenure security. The insecurity is based on the fact that a majority of

farmers still do not possess land ownership titles. Even the farmers that possess this

title and whose land was distributed according to the law are insecure concerning their

legal ownership, because of the claims and disputes made by former owners. From 2011

to 2015, about 3,150 land transactions have been registered on average every year,

covering an area of 750 ha. Rental transactions are rarely registered, usually when

tenant applies for subsidies or is getting credit. Land rental market is generally informal,

so it is hard to estimate the exact number of transactions. Some studies (Deininger et

al., 2013; Qineti et al., 2014) estimate, that about 10% of farmers are involved in land

rental transactions every year. State-owned land rental transactions are very limited.

Data for year 2017 shows there were 10 registered rental transactions of state owned

land that covered a surface of 155.06 ha. Still, the rental market is more flexible than

sale market and less likely to be affected by social norms.



In the Federation of Bosnia and Herzegovina, land market is unregulated and

dysfunctional. Although there is a good legal framework for establishment and

functioning of the land market, this process is extremely slow and inefficient. The

obstacles for establishment of an efficient land market are numerous and related to the

complex and inefficient administrative organization, high decentralization in decision

making processes, unfinished restitution process, structural problems of agriculture and

missing or inefficient institutions. The demand for renting agricultural land is low and

the rented surfaces are insignificant. It is estimated that 80 % of state-owned land

remains unrented and the share of rented private land is less than 10% of total land.

Arable land is most commonly rented for a year, except in cases of permanent crops

production.



In the Republic of Srpska, rental transactions of agricultural land are more common

than sale transactions. The data for rent of private agricultural land are not officially

available, there is only an estimation based on data from the Farm registry, where only

around 30% of arable land is registered. Estimation indicates that 23% of used

agriculture land is rented from the private landowners, which is in total around 72,000

ha.



August 2018 I 18



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

In Kosovo, rental and sale market of agricultural land are not well functioning. There

is lack of information and transparency on the activity in the land market and

privatization of socially owned land, where in many cases; land is transferred into urban

land. Data on ownership is, similarly to Albania not updated, so farmers don’t have the

possibility to change ownership or be eligible to subsidies.



In the Former Yugoslav Republic of Macedonia, agricultural land market is not

enough functional and dynamic. The data for number of rental transactions and rented

area refer to the lease of agricultural land in total (state and private) as there is no

separate information. Based on respondent's estimation, 80% of the total land is leased

with formal contracts since the most of these contracts are signed with the state. The

remaining 20% belong to the lease of private land, mostly with informal contracts.



The agricultural land market in Montenegro is regulated by the Law on Agricultural

Land since 1992 and so far, not much progress has been made in the field of land market

regulations. Agricultural land is most commonly rented on the basis of an oral

agreement between friends and acquaintances, without compensation or most common,

the yield from the land is divided in half. It is considered that writing a contract creates

mistrust between the two parties. The biggest obstacles towards the development of

the agricultural land market are fragmented areas and property-legal relations which

hinders the renting and selling of agricultural land. Rural areas historically belonged to

the people who inhabited these areas, however, with the displacement of the population,

many agricultural parcels were left where agricultural production was not carried out,

but if someone wants to get involved in agriculture productions, they have difficulty

contacting the owner of agricultural land. Consequently, many areas of agricultural land

remain uncultivated. In many cases farmers rent land in order to obtain state-support.

In 2017, 575 rental contracts of private agricultural land were recorded. Based on

estimations, 320 were signed for the purpose of cultivating the land and the rest for the

purpose of obtaining state loans.



In Serbia agricultural holdings use 30% of UAA (about 1 million ha) through renting.

This percentage is even higher according to unofficial data. Size of rented state-owned

agricultural land (without free use) does not oscillate significantly by years and accounts

for about a third of total rented UAA. These numbers indicate that Serbian rental

agricultural land market currently is well-developed.



In all WB countries, the rental market seems to be more important than the sales

market. Based on the respondents’ answers, there is a great diversity in the number of

rental transactions of agricultural land among WB countries/territories. The data in

Tables 4 and 5 are incomplete, especially for privately-owned land, as in no surveyed

country/territory official register of prices and leases are established. In the Federation

of Bosnia and Herzegovina, only five out of ten cantonal ministries of agriculture

submitted data to Federal ministry, although they are obliged to do so. For the privately-

owned land, there is no possibility to collect data, as the contracts on land rental are

made in municipality, and there is not a single centralized database on it. Data for

August 2018 I 19





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Republic of Srpska refers to rent and concessions together. In 2017, 53 transactions

were made as concessions and 426 were made as rent.



Table 4: Rented agricultural land: number of transactions in the last available year

(expert estimations, except AL, BiH (FBiH), BiH (RS), KO, MAC)

BiH





BiH




AL

KO

MAC

MN





SR


(FBiH)

(RS)

Data for year

2017

2015

2017

2016

2016

2017





2012


State-owned agricultural


land

10

2341

4792

3,904

n/a

5

7,693

(no. of transactions)

Privately owned

agricultural land

n/a

n/a

n/a

20,679

n/a

5754

35,0004

(no. of transactions)

Total

n/a

n/a

n/a

24,583

1,4173

5804

42,693

(no. of transactions)

1 Data for 5 out of 10 cantons

2 Data refers to rent and concession together

3 Lease of agricultural land in total (state and private)

4 Expert estimation

n/a – not available



There is also a great diversity among WB countries/territories in the extent of transacted

area (Table 5). In Albania, the data for rent of privately owned agricultural land are not

officially available, as well as in Republic of Srpska and Montenegro. Some studies in

Albania suggest that so far, 4,000 ha of land have been officially leased. Agency for Real

Estate Cadastre of the Former Yugoslav Republic of Macedonia publishes the data for

the lease of agricultural land in total and not separated by state or private land, but the

expert estimation is, that 80% of the rented land is state land and the remaining 20%

is private agricultural land.



August 2018 I 20





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 5: Rented agricultural land - transacted area (ha; expert estimations except AL,

BiH (FBiH), BiH (RS,) KO, MAC)



BiH





AL


BiH (RS)

KO

MAC

MN





SR


(FBiH)

Data for year

2017

2015

2017

2016

2016

2017





2012


State owned


155

2,4941

17,9992

6,311

n/a

110

261,315

agricultural land

Privately owned

n/a

n/a

n/a

60,032

n/a

n/a

613,9274

agricultural land

Total

n/a

n/a

n/a

66,343

2,3603

n/a

875,2425

1 No centralized database; data for 5 out of 10 cantons

2 Data refers to rent and concession together

3 Lease of agricultural land in total (state and private)

4 Expert estimation

5 Total rented UAA by agricultural holdings for money or in kind

n/a – not available





5.2 Informal rental market


According to the respondents’ answers in Table 6, there is a great difference in the share

of informal rental contracts among WB countries/territories. In some

countries/territories this share is (based on estimations) up to 10% (Federation of

Bosnia and Herzegovina, Serbia), while in other countries/territories (Albania, the

Former Yugoslav Republic of Macedonia, Montenegro) 70% or more of agricultural

holdings renting agricultural land without formal contracts. Data refers to transactions

of privately-owned land, since renting of the state land is arranged with formal

contracts.



The share is the highest in Albania (90%), where rental market of private land functions

generally informally as rental agreements shorter than 6 years aren’t obliged to be

registered. Transactions are usually done between co-villagers, neighbors and relatives,

most often for the period of one year. Land is generally rented out by farmers who don’t

live in the village anymore or those who don’t have enough work forces in order to

cultivate the land. In the Former Yugoslav Republic of Macedonia small farmers

often (in around 70% of cases) rent land from relatives or other villagers without a

formal lease contract and usually for a short period of time (one year). The data for

Republic of Srpska and Kosovo is not available. Participators in focus groups in

Republic of Srpska stated that the practice of formal or informal renting of private

agricultural land is common. A lot of the land is still used without any written tracing

but this practice is not illegal. In Montenegro, every contract that is formal has some

background, whether it is a loan application or state aid. It was estimated that only 30%

of contracts are formal and the rest are oral agreements for the duration of one or more

seasons. Respondents from Serbia estimated that the share of informal contracts is 5-

10%.

August 2018 I 21





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 6: Share of informal rental contracts (%); expert estimations





BiH





AL


BiH (RS)

KO

MAC

MN





SR


(FBiH)

Informal rental

Less than

Cca. 90%

n/a

n/a

70%

70%

5-10%

contracts

5%

n/a – not available





5.3 Rental prices and types of payment



Among WB countries/territories, rental prices are formed differently, depending whether

they are state-owned or privately-owned. Rental prices for privately owned land are

formed freely on the market in all of the surveyed countries/territories and based on

different criteria (location, land quality, land category, natural conditions, kinship, etc.).



On the other hand, prices for state-owned land are most often regulated. In Albania

they are regulated on auctions, organized by the Ministry of Agriculture and Rural

Development. In Federation of Bosnia and Herzegovina, rental prices for state-

owned agricultural land are only partly regulated by the government, as the initial

minimum rental price is defined, but the final price is formed on the basis on submitted

offers. For the rent of state agricultural land in Republic of Srpska, prices are set

depending on the class of land and its location (altitude of municipality). Rental prices

of agricultural land in Kosovo are determined by the market price and based on the

public competition tender. In the Former Yugoslav Republic of Macedonia, the price

for the lease of state land is formed on a public tender and the starting price is

determined depending on the cadaster class and the location of the land. State-owned

land in Montenegro is leased on public tenders and the total value of the land is

estimated by the Real Estate Directorate. In Serbia, state-owned agricultural land is

rented by a local self-government unit, and the initial price is determined on the basis

of the rents paid for the agricultural land in the previous year (in the first round, the

starting rental price is 80% of the market price, and in the second round it is 60% of

the market price for the rent of agricultural land last year). Maximum rental price is not

determined.



In the Table 7, ranges or average rental prices of agricultural land are presented. Prices

were given for private land and state land. Rental prices for agricultural land in WB

countries/territories vary depending on the region, ownership, land availability, land

use, land category, soil quality, plot size and shape, natural conditions, etc. This must

be considered because the prices in Table 7 are given for different land characteristics.

According to data, the highest rental prices are in Albania and Montenegro while the

lowest average rental prices are in Federation of Bosnia and Herzegovina and the

Former Yugoslav Republic of Macedonia.



August 2018 I 22



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

The average rental prices for privately owned land in Albania in 2017 varies from 75

EUR/ha /year for a poor quality agricultural land, up to 400 EUR/ ha/ year in the most

fertile regions. In some very fertile regions such as Divjaka or Xara the land rental rate

may go even up to 1,000 EUR/ ha/ year.



The rental prices for state-owned agricultural land are primarily determined on

agricultural land rating, condition of irrigation and drainage infrastructure, distance to

market, road infrastructure and the level of agro-processing industry in the area. The

average rental prices for state-owned agricultural land ranged from 50-220 eur/ha/year

in 2016.

In Federation of Bosnia and Herzegovina, rental prices of state-owned agricultural

land are slightly lower than the prices of privately owned one. Neglected and overgrown

agricultural land owned by the state in 2017 could be rented for around 15 EUR/ha and

privately owned ploughed fields for about 150 EUR/ha. In general, arable land has the

highest price, followed by meadows and pastures. But rental price for pastures in

densely populated regions with developed agricultural production sometimes exceeds

even rental price of arable land in regions with less developed agricultural production.



The average rental price of agricultural land in Republic of Srpska ranged from 50 to

250 EUR per hectare in 2017. The location and the size of the land parcel have the

biggest impact on the rental prices.



As in Federation of Bosnia and Herzegovina, rental prices in Former Yugoslav

Republic of Macedonia are higher for private agricultural land than the the state-

owned land. The reason is that the highest quality state-owned land has already been

leased 10-15 years ago, and in the past 2-3 years, low quality and unattractive land has

been under lease. The state-owned land is given on tender, so there is a minimum

starting price determined, based on cadastral class and location.



Kosovo provided the data also for different land uses. Average rental price in 2017 for

orchards was 440 EUR/ha, for vineyards 339 EUR/ha and for grasslands 220 EUR/ha.



In Serbia, rental prices are constantly growing. Prices vary significantly between the

regions. For example, in Vojvodina, rental prices are approximately 35% higher than in

central Serbia.



August 2018 I 23





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 7: Average rental prices (EUR/ha) of agricultural land in the last available year



AL





BiH


BiH (RS)

KO

MAC

MN





SR


(FBiH)

Data for year

2017

2017

2017

2017





2016


n/a





2016


75-


100-

Average rental prices

1,000/ye

1,000/ye

50-

1805-

of agricultural land

ar1

15-150

ar

250/year

542

70/year3

1976

(EUR/ha)

(220-380

(around

/year)2

400)4

1 Private land; based on interviews with the real estate companies

2 Data from focus groups

3 Data for private and state-owned arable land

4 Expert estimation

5 Privately owned arable land, medium quality; expert estimate

6 State-owned arable land, medium quality

n/a – not available



The most common types of payment of the rent for agricultural land are in cash,

especially for the state owned land. In the Former Yugoslav Republic of Macedonia, the

tenant can also make the compensation with the subsidies, paid by the paying agency.

In some countries/territories (Albania, Republic of Srpska, Serbia, Montenegro) the rent

for privately owned land can be paid in kind, or also through work (Kosovo, Republic of

Srpska). In Montenegro it is common that if the risk of agricultural production is high,

the land owners will first rent agricultural land for cash, while if the risk is very small

and if a high yield is expected, then the owners decide to share the yield.



5.4 Possible renters of agricultural land



In Albania all natural and legal (local or foreigner) persons are eligible for renting state-

owned and privately-owned agricultural land. The situation is the same in Kosovo, while

the foreigners must be registered in the country. In the Federation of Bosnia and

Herzegovina only farmers and legal entities that conduct agricultural activity can rent

state and private agricultural land. In the Republic of Srpska, there are no formal

restrictions for the rent of private land. For the rent of state agricultural land can apply

companies and entrepreneurs registered for carrying out agricultural activities and

physical persons engaged in agricultural production. They must fulfill several general

conditions: they must be registered in the Registry of agricultural households, have their

permanent address or place of business in the municipality where the rented land is

located, at least one year prior to the submission of the bid, and have agricultural

mechanization.



Depending on the type of agricultural production planned to be carried out on leased

agricultural land, the following special conditions shall also be met by the companies,

August 2018 I 24



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

entrepreneurs and physical persons: they must have a certain livestock stock and

agricultural land, or to already have certain areas of agricultural land under crop,

vegetable or fruit trees. Special conditions can be defined by the local self-government

units in accordance with the state of development of agricultural production in the area

where the agricultural land is rent. The concession for the use of agricultural land can

be granted to domestic and foreign legal entities.



In the Former Yugoslav Republic of Macedonia, domestic natural and legal persons

and foreign legal entities have the right to participate in the public announcement and

to submit bids. The natural persons must be registered in the agricultural activity and/or

registered in the single registry of agricultural holdings and/or to be a sole proprietor

on whom the agricultural production or processing of primary agricultural products is

the main activity. The foreign legal entities have the right to participate in a public

announcement if they have registered subsidiaries in the Former Yugoslav Republic of

Macedonia.



For renting state-owned land in Montenegro, there are no conditions on who can rent

the land, addressed by the law. However, when the Ministry of Agriculture and Rural

Development issued an advertisement for renting state agricultural land it was stated

that, the natural person or legal entity must:

 be registered in the Register of Agricultural Holdings;

 submit an investment program with a reference to the amount of investment,

the number of new jobs, the volume of production, the land use plan for a period;

 submit a written statement obliging that at least 80% of the total leased area

will be planted;

 submit the amount of leased land, with the amount not to be less than 100 EUR

per hectare. The proposed amount of rent is one of the criteria for evaluating the

offer;

 respect the principles of good agricultural practice;

 fulfill within the period of not more than 5 years from the conclusion of the

agreement all obligations specified in the investment program attached to the

offer.

While there are many conditions for renting state-owned agricultural land, there are no

conditions for renting private land.



In Serbia, there are no restrictions for renting privately owned agricultural land, but

the tenant of state owned agricultural land can be a natural and legal person that fulfils

certain conditions, depending on whether this land is rented under the right of priority

lease, the right of first refusal, or in the first or second round of public bid.



August 2018 I 25





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 8: Possible renters of agricultural land (expert opinion) in WB countries/territories



AL





BiH


BiH (RS)

KO

MAC

MN5





SR5


(FBiH)

Non-farmers

Yes

No

No

Yes

No

Yes

Yes

Foreigners

Yes

No

Yes2

Yes3

No

Yes

Yes

Legal entity

Yes

Yes1

Yes

Yes

Yes

Yes

Yes

Legal entity,

owned by

Yes

No

Yes

Yes

Yes4

Yes

Yes

foreigners

Others

n/a

n/a

No

n/a

n/a

Yes

Yes

1 Registered for agricultural production

2 Foreigners are eligible only for concession

3 Must be registered in Kosovo

4 If they have registered subsidiaries in MAC

5 Refers to renting of private agricultural land



Table 9 shows, which of the two involved parties can get the subsidies in the case of

renting agricultural land.



Table 9: Possible receivers of subsidies in case of renting agricultural land in WB

countries/territories



AL





BiH


BiH (RS)

KO

MAC

MN





SR


(FBiH)

Tenant

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Owner

No

No

Yes

Yes

Yes

No

No



In Albania, Federation of Bosnia and Herzegovina, Montenegro and Serbia, the

subsidies are received by the one who rents the land and not its owner. In order to get

the subsidy, the renter must provide the renting contract. In Federation of Bosnia and

Herzegovina registering the farm into the Register of agricultural households is also

obliged. In Kosovo, this depends on the agreement that decides whether the tenant or

the owner gets them, but it is very common that the subsidies are taken by the owner

of the agricultural land. In Republic of Srpska, not all of the farmers are registered in

the Farm Registry, because it is done voluntarily. However, the registration and a rental

contract or a statement that the land is given without any financial compensation is

needed for acquiring the subsidy. The right to acquire the subsidy has either the owner

or the tenant, depending on who registered the land. If the lease agreement in the

Former Yugoslav Republic of Macedonia is notarized, it becomes official and thus

the tenant has the right to apply for subsidies. There are special forms of contracts

which are also notarized, but in those agreements the tenant takes the land for rent

free of charge, i.e. it has no obligation to pay the lease to the lessor. And in this case

the subsidies are taken by the tenant. If the contract is oral and not certified by the

notary public, the subsidy is given to the owner.

August 2018 I 26





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries



5.5 Cross-country findings



Rental market with agriculture land in WB countries/territories is not fully functioning.

Serbia has the most developed land market among all WB countries/territories. In the

year 2012 has rented 875 thousands hectares which is ten times more than all other

WB countries together. There is a lack of reliable data and great share of informal renting

shows that functioning of the rental market with agricultural land is limited. In some

countries/territories this share is up to 10% (Federation of Bosnia and Herzegovina,

Serbia), while in other countries/territories (Albania, the Former Yugoslav Republic

of Macedonia, Montenegro) 70% or more of agricultural holdings renting agricultural

land without formal contracts.



Rental prices for privately owned land are formed freely on the market in all of the

surveyed countries/territories while state owned land is most often regulated. The prices

vary according to the quality, location and use of agricultural land. In general the highest

prices are for arable land, followed by permanent crops and pastures and meadows. The

highest rental prices are in Albania and Montenegro while the lowest average rental

prices are in Federation of Bosnia and Herzegovina and the Former Yugoslav

Republic of Macedonia.

August 2018 I 27





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

6 Sales market in Western Balkans



In this chapter, respondents were asked to provide information about the average sales

prices of agricultural land, how are the prices formed and how they vary with different

land characteristics. They were also asked about the possible buyers and restrictions

regarding the buying of agricultural land.





6.1 General information


In Albania, sale of agricultural land is very limited and sale market is less developed

than rental market. After sale, agricultural land is often converted to construction sites,

either for housing or business activities. This process is being controlled by zoning

policies, but even so, it has raised the price of land significantly. Based on the findings

from the focus groups, farmers behave based on social norms and are reluctant to sell

land, because it is considered a virtue. Even households that live elsewhere rather rent

out the land or cultivate it than sell it. Young families and mostly migrants are more

willing to sell the land. Some farmers, mostly elders sell the land because of lack of

money in the case of health problems, poor economic situations etc.



There is a lack of reliable data related to agricultural land sale in Federation of Bosnia

and Herzegovina. The system is highly decentralized and all sales related activities

take place at the municipal level. Land registers, stored in municipal courts, do not have

data on sold surfaces, neither does cadaster.



In the Republic of Srpska, sales market is less developed than rental market. Only a

small area of land in sold every year and often the agricultural land is purchased for the

purpose of being used for construction. The trade of private agricultural land is free and

depends exclusively on the interests of stakeholders. Small farms can freely buy and

sell agricultural land. Possible obstacles when buying land are lack of money, poor

information on offer and demand, insufficient knowledge of procedures for changing

ownership and transaction costs. The change in ownership of agricultural land requires

signing of the contract and registration ownership change in land book (managed by

geodetic administration).



Similar situation as in Albania is happening in Kosovo. Participants of the focus groups

emphasized that very limited amount of land is offered on the market every year due

to family traditions. They are using the land as storage for wealth. Another problem is

the illegal changes of purpose in agricultural land use. Because of the lack of statistics,

there is even no information on how much agricultural land is lost every year and no

strategy to address these illegal changes.



In the Former Yugoslav Republic of Macedonia there are many factors that hinder

the sale of agricultural land. The ownership is not settled due to unregistered hereditary

right, abandoned land, shared ownership and the unfinished denationalization process.

Such cases are still present at 20-30% from the arable agricultural land. Although

August 2018 I 28





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

inheritance through legal inheritance procedures is one of the main factors for the

negative situation and a further trend of division of the land parcels, the unsettled cases

of ownership and consequently the physical division of the land are a problem for placing

these land resources in use or in the land market. The weak land market, which does

not contribute to the consolidation of agricultural economies in a market way, as well

as the low economic growth and lack of social security, continues the process of

fragmentation and diversification of small parcel production. The mobility of the land is

also often reduced because of the tradition according to which the agricultural

economies remain the property of the oldest family member until the end of his life. In

2016, 5,788 transactions of agricultural land were registered and all of them refer to

private land as stat-owned land is not subject for sale.



In Serbia, agricultural land sales market is moderately developed. In the last 15 years

it has become more active and the prices are estimated to have increased at least two

times, and even three times for arable agricultural land. Every year, 1-3% of the total UAA

is sold and purchased. It is expected that in the following period the agricultural land

market will be even more active. The main reasons are:

 Part of the state agricultural land will be subject to purchase;

 Sale of land by elderly households;

 Change of tax policy (a shift from taxation by cadastral income to taxation of

agricultural land at market value) will contribute to the transition of land from

inefficient to efficient farmers (SEEDEV, 2017).





6.2 Sales prices


According to the respondents’ answers, there is a great diversity in the average sale

prices of agricultural land among WB countries/territories. Sales prices of agricultural

land vary according to different factors (not ordered by significance): location, land

quality, natural conditions, fertility, irrigation potential, infrastructure and landscape

characteristics, accessibility and others. There are also speculative reasons for the

purchase of agricultural land based on expectations that it will be later converted into

construction land. In such cases the market value and prices of agricultural land are

significantly higher. The reported sale prices in Table 10 vary between 1,000 EUR/ha in

Montenegro and up to 175,000 EUR/ha for plots with very favorable natural conditions

for intensive agricultural production in Mediterranean regions of Federation of Bosnia

and Herzegovina. The data shown in Table 10 refers to prices of different categories of

land use and different land qualities, so they cannot be compared directly.



August 2018 I 29





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 10: Average sale prices of agricultural land (EUR/ha; expert estimations except

FBiH, MAC, RS)



BiH





AL


(FBiH)

BiH (RS)

KO

MAC

MN

SR





Data for year


n/a

n/a

n/a

n/a





2016


n/a





2015


1,000-

Average sales

4,000-

5,000-

2,500-

11,000-

4,0002

prices (EUR/ha)

8,000

175,000

50,000

3,400

35,0001

(up to

7,7004

30,0003)

1 Arable land

2 Meadows and pastures for cattle breeding

3 Coastal land, for cultivating olives and citruses

4 Arable and non-cultivated agricultural land



Sales prices are not regulated by the government in any of the surveyed WB

countries/territories, but are formed freely on the market. However, in Montenegro the

state has created a legal framework for pricing. They adopted closer criteria and

methodology for determining the market value of real estate. It is determined as the

product of average market price of m2 of real estate and size of real estate, applying the

criteria established by this regulation.



6.3 Possible buyers of agricultural land



In all surveyed WB countries/territories are some restrictions for buying agricultural

land, regarding the possible buyer. In the Table 11 are shown all the possible buyers.



Table 11: Possible buyers of agricultural land (expert opinion) in WB countries/territories



BiH





AL


(FBiH)

BiH (RS)

KO

MAC

MN





SR6


Foreigners


No

No

Yes4

Yes5

No

No

Yes

Domestic

legal entity

Yes

Yes2

Yes

Yes

Yes

Yes

Yes

Legal entity,

owned by

Yes

No

Yes4

Yes

No

No

Yes

foreigners

Others

Yes1

Yes3

Yes

n/a

n/a

Yes

Yes

1 Albanian companies with foreign ownership

2 Must conduct agricultural production

3 Any BiH citizen

4 Under the terms of reciprocity or on the basis of an international agreement

5 Must be registered in Kosovo

6 Data refers to buyers of privately owned agricultural land

n/a – not available

August 2018 I 30



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries



In Albania, there is no sale of state owned land, until the denationalisation process is

completed. The process will define which land will be used for compensating and which

land will be further available for sale. There are no restrictions for buying private

agricultural land for domestic physical and juridical persons, only for foreigners.

Foreigners are not allowed to buy land for up to 7 years from entry into force of the

Stabilization and Association Agreement between Albania and EU member states signed

in April 2009. They can buy agricultural land only if they are shareholders of an Albanian

juridical entity.



In the Federation of the Bosnia and Herzegovina, state-owned agricultural land

cannot be sold at all. Exception is possible only when Parliament of Federation of the

Bosnia and Herzegovina determines general social interest to sell agricultural land.

Farmers and legal entities can only rent state-owned agricultural land. There are no

special conditions for purchasing agricultural land. Any citizen or legal entity from FBH

can buy it. Foreigners and foreign legal entities cannot buy agricultural land unless there

is an international state agreement on it. The only way for foreign citizen to become the

owner of agricultural land is through inheritance. The Law on agricultural land allows

sale of agricultural land exclusively for purpose of agricultural production, but in practice

this rule is very often not obeyed.



In the Republic of Srpska state owned land is sold only in exceptional cases to legal

and natural persons who have registered agricultural activity or place of permanent

residence in the territory of Bosnia and Herzegovina. Foreigners can buy agricultural

land on the basis of reciprocity agreement. The concessions for the use of agricultural

land can be granted to a domestic or foreign, legal or physical person. There are no

conditions for the sale of private agricultural land.



In Kosovo farmers can receive socially owned agricultural land for rent until the stage

of public tender announcement for sale. The maximum renting period is one year, with

possible prolongation. Farmers can take part in a public tender for the purchase of the

agricultural land as any other competitor who does not engage in agricultural activity.

However, one requirement for foreigners is that they must be registered in Kosovo.



In the Former Yugoslav Republic of Macedonia there is no sale of state-owned

agricultural land, although there is a law on it which is not implemented in practice.

Only citizens of the Republic of Macedonia can buy agricultural land on the territory of

the Republic of Macedonia without any restrictions. Foreign natural and legal persons

cannot acquire the right to ownership of agricultural land, but can, under conditions of

reciprocity, acquire the right to long-term lease of agricultural land on the territory of

the Republic of Macedonia, on the basis of the consent of the Minister of Justice, upon

previously obtained opinion of the Minister of Agriculture, Forestry and Water Economy

and the Minister of Finance.



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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

In Montenegro, all citizens can become owners of agricultural land, whether in private

or state ownership. However, foreigners cannot become the owners of agricultural land,

in accordance with the law.



For Serbia, natural persons from European Union can buy up to 2 ha of agricultural

land, but they have to be registered in the Registry of Agricultural Holdings (RAH). Legal

entities, owned by foreigners must be registered in Serbia, while there are no conditions

for citizens of Serbia. In the case of buying state owned land, only domestic natural

persons, who are farmers and registered in RAH can buy up to 20 ha, but this law has

not been implemented yet.



6.4 Cross-country findings



In all WB countries/territories sales market of agricultural land is less developed than

rental market. There are great differences between countries in the extent of sales

market of the agricultural land. There is lack of reliable data for number of transactions

and transacted area in all countries/territories, except in FYR Macedonia.



There is a great diversity in the average sale prices of agricultural land among WB

countries/territories. Sales prices vary with land quality, category, region, natural

conditions in all WB countries/territories.



Another problem in most countries/territories is changing of purpose of agricultural land.

Farmers purchase of agricultural land based on expectations that it will be later

converted into construction land. In such cases the market value and prices of

agricultural land are significantly higher.



Another obstacle for efficient sales market is no formal transfer of ownership when the

land is sold (Albania, Kosovo) and inheritance laws hinder the transfer of agricultural

land and lead to further fragmentation.



August 2018 I 32





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Land market regulations in Western Balkans



Agricultural land is a subject to certain institutional regulations. Agricultural land rental

market regulations differ from the sales market regulations. Therefore, we consider

them in separate chapters, starting with the rental market regulations.





6.5 Rental market regulations


Land market regulations affect land rental prices and land availability. In all WB

countries/territories are prescribed conditions for renting agricultural land, which are

presented below.





6.5.1 General rental market regulations


In Albania, the application for renting state-owned land needs to contain applicant

data, description of the project related to agricultural activity, business plan,

environmental impact assessment, rental period, offered price and Certificate that

applicant doesn’t have any financial or legal obligation towards the state. If the land is

rented for more than 6 years, the land must be registered at the Immovable Properties

Registration Office (IPRO). Rental agreements shorter than 6 years aren’t obliged to be

registered. When renting state-owned land, a notarized contract and an updated title of

ownership must be provided. When renting private land, the procedure is most often

done verbally and without any written contract. There aren’t any pre-emptive rights

regarding the renting of land.



In the Federation of Bosnia and Herzegovina, registration procedures are different

for state-owned and privately-owned agricultural land renting. When state-owned land

is rented, contract is made between cantonal ministry of agriculture and the tenant. It

is responsibility and duty of cantonal ministry to forward the contract to the court in

charge of entering the right into land register. Formal renting of privately-owned

agricultural land is registered by public notary. Farmers that apply for budgetary support

from the ministry of agriculture are supposed to submit contract to the Register of farms

and land register.



Agricultural land, both state and private can only be rented for agricultural production

by agricultural holdings and legal entities registered for agricultural production. State-

owned land in undeveloped municipalities can be rented by domicile persons or legal

entities on the basis of the written statement of conducting agricultural activity and

being resident over the last ten years. Pre-emptive rights regarding renting agricultural

land exist only for state-owned land. They include:

 Previous tenants if they fulfilled all duties from the contract;

 Households with agriculture as exclusive or dominant economic activity and with

insufficient land to ensure their economic stability;

 Households with the neighboring properties to the renting land.

August 2018 I 33



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries



The Republic of Srpska also has certain conditions for the rent of the state-owned

agricultural land. The rent of state agricultural land is registered and signed by the

Ministry of Agriculture, Forestry and Water Management. Same applies for state land

given under concessions. According to the provisions of the Law on Survey and Cadaster

any given concession or rent right for a period longer than 5 years should be evidenced

in the cadaster of real estate, but this legal provision is not being implemented in

practice. State-owned agricultural land is rented through a public advertisement by

obtaining written or oral bids. The procedure is carried out by local self-government

units in co-operation with the respective ministry. The bidder must have permanent

address or place of business in the municipality where the rented land is located, at

least one year prior to the submission of the bid, and have agricultural mechanization.

Special conditions can be defined by the local self-government units in accordance with

the state of development of agricultural production in the area where the agricultural

land is rent. The concession for the use of agricultural land in Republic of Srpska may

be granted to domestic and foreign legal entities for a period of up to 30 years. The

decision on allocation of agricultural land for concession use is made by the government.

A copy of the concession contract is delivered to the geodetic administration for

registration.



Law on agricultural land foresees that if the owner does not use the land for more than

1 year, he is obliged to lease it or allow it to be used in another way. Rent of private

agriculture land is not obligatory to register, but if the renter wants to get the subsidy

connected with land area, he is obliged to sign and submit renting contract or at least

statement of land owner that he allows the renter to use that land free of charge. Those

documents must be certified by authorities.



In Kosovo agricultural land can be leased to the natural and legal persons, local and

foreigners who deal with agricultural activities, in accordance with the law. The

responsible Institution for official registration procedures of the rental market in Kosovo

is the municipal cadastral office. The law also stipulates that the long-term lease

contract must be in the written form, or it has no legal value and the same should be

registered with the competent municipal body for the agriculture. Lease contract shall

comprise:

 Names and addresses of contractors;

 Date of binding the contract

 Cadastral data on agricultural land;

 Duration of contract;

 Amount, term and manner of payment of lease;

 Description and value of facilities, equipment, crops and manner of their

maintenance;

 Time of depreciation of crops;

August 2018 I 34



Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 Rights and obligations of parties;

 Purpose of using the leased land;

 Reasons for canceling the contract;

 Dispute resolution procedure.

The leasing procedure for the state-owned agricultural land goes through public tender,

while for the renting of privately-owned agricultural land, there is no specific procedure.

Usually, contractual parties conclude an oral agreement.



In the Former Yugoslav Republic of Macedonia, the participants on the public

announcement for granting state-owned agricultural land for lease have to submit:

a) For legal entities:

 Application form;

 Evidence for the performed registration in the trade registry or from another

competent body for registration of legal entities, evidence for settled obligations

in regard with the obligation for contributions and salaries for the employees; a

business plan that shall obligatorily contain the basic data about the participant,

the purpose for which the land is going to be used, applied technology, number

of employees, market aspects and expected production-economic results, sum

of the planned investments, and other needed documentation specified in the

public announcement;

 Offer for the amount of the annual lease;

 Statement (registered with the Notary Public) from the founders and the

responsible person in the legal entity that they were not founders or managers

of the legal entity that had used the agricultural land in state ownership under

lease, and haven’t fulfilled the obligations from that contract.

b) For physical entities:



 Application form;

 Evidence for settled public fees;

 Copy of the personal identification card;

 Confirmation for recording in the sole registry of agricultural households; a

decision for registered trader of agricultural activity or evidence from a central

register for a registered sole proprietor,

 A land use program;

 A statement of the reliability of the data provided with the notarized application;

 Other required documentation specified in the public announcement;

 Offer for the amount of the annual lease and;

 A statement certified by a notary public that he was not a founder or a

responsible person in the legal entity that used state-owned agricultural land for

lease, and which did not fulfill the obligations under that contract.

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

The participants in the public announcement for granting state-owned agricultural land

in a lease with an area over 10 ha shall submit to the offer a bank guarantee for

participation in the procedure in the amount of the offered annual lease. Every lease

agreement on agricultural land, whether it is private or state, is certified by a notary.

The notary has an obligation to enter the basic characteristics of the land for lease in

special forms and to register them in the Agency for Cadastre. From the forms received

from the notary, the cadastre forms the base of prices and leases of real estate in the

Republic of Macedonia.



In Montenegro the Ministry of Agriculture and Rural Development publishes an

advertisement for renting state agricultural land. The bidder (natural person or legal

entity) must be registered in the Register of Agricultural Holdings. They must submit an

investment program with a reference to the amount of investment, the number of new

jobs, the volume of production and the land use plan for a period. The bidder must also

submit a written statement obliging that at least 80% of the total leased area be

cultivated. The bidder has to submit the amount of the annual rent per ha of leased land

The proposed amount of rent is one of the criteria for evaluating the offer. The bidder

has to respect the principles of good agricultural practice and regular application of agro-

technical measures. The bidder has to within the 5-year period fulfil obligations specified

in the in the Investment Program attached to the offer and which will be an integral part

of the Lease Agreement



In Serbia the tenant of state owned agricultural land can be a natural and legal person

that fulfils certain conditions. There are several conditions for renting state owned

agricultural land depending on whether this land is rented under: (a) the right of priority

lease, (b) the right of first refusal, or (c) in the first or second round of public bid:

 The right of priority lease have registered agricultural holdings which will invest

at least 500,000 EUR in processing capacities (minimum 500 EUR/ha), in the

period up to 3 years from the date of commencement of the investment, except

in units of local self-government that have less than 1,000 ha of state-owned

agricultural land, where the total investment amount may be less than 500,000

EUR;

 The right of first refusal exercised by legal and natural persons which own

irrigation, drainage system, fisheries, agricultural building, hothouse,

greenhouse and perennial planting (orchards and vineyards still producing crops)

located on state-owned agricultural land, which is registered in the Register of

Agricultural Holdings (RAH), and holds active status for at least three years;

 Own domestic animals, who is also the owner, or the tenant of a facility for

breeding these animals in the territory of a local self-government unit (LSG)

where the right of first refusal is exercised and which is registered in the RAH,

and holds active status for at least one year;

 The right to participate in a public bid for the leasing of state-owned agricultural

land in the first round may be exercised by a natural person registered in the

RAH and holding an active status for at least 3 years, residing for at least 3 years

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

in the territory of LSG which conducts a public bid, and whose plot borders state-

owned land that is the subject of a lease. The right to participate in the second

round may be exercised by a legal and natural person registered in the RAH and

holding an active status for at least 3 years.

The right to participate in a public bid for the leasing of state-owned agricultural land in

the first round may be exercised by a natural person registered in the RAH and holding

an active status for at least 3 years, residing for at least 3 years in the territory of LSG

which conducts a public bid, and whose plot borders state-owned land that is the subject

of a lease. The right to participate in the second round have legal and natural person

registered in the RAH and have an active status for at least 3 years.





6.5.2 Duration of rental contracts


According to the respondents’ answers there are significant differences between WB

countries/territories regarding the maximum and minimum duration of rental contracts

(Table 12).



Table 12: The duration of rental contracts in WB countries/territories (years)





AL


BiH (FBiH)

BiH (RS)1

KO

MAC

MN





SR


Min.

Max.

Min.

Max.

Min.

Max.

Min.

Max.

Min.

Max.

Min.

Max.

Min.

Max.

1

99

1

25

8

30

3

99

1

50

1

7

1

40

(301)

1 Applies to state-owned land only



In Albania, the shortest lease period for agricultural land is one year and the longest

period is 99 years, while the rented area can be between 2 and 1,100 ha. The state

owned land can be rented for different time periods, depending on land use:

 Up to 10 years for field crops, oil-seeds and decorative plants;

 Up to 30 years for of vineyards, fruit-trees, greenhouses and seedlings;

 Up to 99 years for olive-grooves, walnuts and other fruit-tree species;



According to the law in Kosovo, agricultural land can be rented in a form of long term

lease (3 years and more), short term lease and grazing lease. The duration of rental

contracts is between 3 and 99 years (Table 12).

The Federation of Bosnia and Herzegovina doesn’t have any limitations of the area

that can be rented. Arable land is most commonly rented for a year and up to 10 years,

except in cases of permanent crops production when the duration of the rental contracts

is extended to 25 years.



The minimum rental period for the state-owned land in the Republic of Srpska is 8

years, while the longest rental period is 30 years for all land categories. The period for

which concessions have been granted may be extended during the negotiation process,

but no longer than 50 years. Natural persons can rent up to 100 ha of agricultural land,

August 2018 I 37





Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

while for legal entities the area is limited to 200 ha. Vast majority of land rental is

realized by commercial farmers with insufficient land property. Officially land renting

on contractual basis provides farmers possibility to Register the farm and, thus, get

budgetary support for agricultural production. Both state-owned and privately owned

land rental is formalized, so the share of informal rental contracts can be assessed as

insignificant (less than 5%).



Agricultural state-owned land in the Former Yugoslav Republic of Macedonia can

be leased out between 15 and 50 years, depending on the type of production. For raising

long-term plantations (vineyards, orchards, hops) and greenhouses duration of the

contract can be up to 30 years, for raising olive trees up to 50 years, for meadows up

to 15 years, for growing fast growing trees of agricultural land located at an altitude

above 700 meters up to 30 years, as well as for fisheries (up to 20 years old). State-

owned agricultural land, which forms blocks with natural borders, is leased out as a

whole, unless state-owned agricultural land is awarded in a bid-collection procedure or

in a procedure for areas up to 10 ha.



Montenegro has besides the Republic of Srpska one of the shortest renting period

among all WB countries/territories. The maximum duration of the rental contract for

private land is not regulated by the government. Usually it lasts for one year and up to

7 years if the farmer will realize an investment. In some public calls for renting state

land, the lease period is 30 years. The rented area for arable land and permanent crops

can be between 0.5 and 5 ha and for meadows between 1 and 10 ha of agricultural

land. There aren’t any pre-emptive rights regarding the renting of agricultural land.



State-owned agricultural land in Serbia may be leased to a natural or legal person for

a period that is not shorter than 1 year and not longer than 30 years, and for fishponds

and vineyards not longer than 40 years. The concession for the use of agricultural land

can be granted for a period of up to 30 years.





6.5.3 Rental contract termination


Another factor that influences rental market is termination of rental contracts. The most

common reason for the termination of rental contract in WB countries/territories is

failure to comply with contractual obligations, as is the case in Albania.



In Kosovo, termination of the renting contract is regulated by the law. The owner can

terminate the lease contract when lessee does not pay the rent, does not use the

agricultural land in compliance with agro-technical measures, subleases the agricultural

land with no owner consent, without consent of the landlord invests on agricultural land

over boundaries foreseen by the contract, or changes the manner of using the

agricultural land or undertakes other actions in contradiction with provision of the Law

on Protection of Nature or actions which have negative effects on the property and

environment and in any way endangers existence of natural value.



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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Contracts in the Federation of Bosnia and Herzegovina can be terminated if the

rented agricultural land is not used and managed according to propositions of contract,

or if the tenant changes the purpose of the land.



The owner of the land in the Republic of Srpska may terminate the rental contract of

agricultural land if the tenant fails to pay the rent, doesn’t use agricultural land as a

good landholder, cultivates agricultural land contrary to the provisions of the contract

concluded, rent rented agricultural land under subdivision or enables other legal

persons, entrepreneurs and natural persons to use land in any way by renting

agreement. The reason for termination is also if in the absence of the approval of the

lesser, invests works on agricultural land that exceed the limits of normal disposal or

change the type of use of agricultural land or perform activities contrary to legal

regulations on nature protection or activities that have a negative impact on the wealth

or natural state of the environment and in any way jeopardizes the survival of natural

values. Lessee also can’t use agricultural land for non-agricultural purposes or change

the purpose contrary to the provisions of the contract.



The rental contracts in the Former Yugoslav Republic of Macedonia are terminated

with the agreement between the contracting parties, expiration of the time for which it

is concluded, change of the purpose of agricultural land, by starting bankruptcy or

liquidation procedure and with the death of the lessee or deleting the individual farmer

from the Register of Agricultural Professionals.



The most common reasons for the termination of the rental contract in Montenegro

are contempt of this contract because the lessee does not settle its obligations, or has

not adequately disposed resources from the leased agricultural land. Often it happens

that on leased agricultural land there are persons who own land, but who are not the

formal landowners. Such cases are very common, so the person who leased the land is

in a difficult situation, because he has not signed a contract, and there is a risk that a

person who owns the land will appear, with whom he has not arranged verbal

agreement.



In Serbia, typical reasons for termination of rental contracts is failure to comply with

contractual obligations, primarily failure to pay rent, and taking actions on agricultural

land that will reduce the value of agricultural land. In the case of state-owned

agricultural land, the main reason is investment in that agricultural land without the

consent of Ministry.





6.6 Sales market regulations


Surveyed WB countries/territories have sales market regulations that also affect land

prices and land availability when purchasing. Respondents were asked about sales prices

regulations, pre-emtive rights regarding the purchase of agricultural land, property

rights, taxes associated with land sales/ownership and changes of the purpose of

agricultural land.

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





6.6.1 Sales prices


In some WB countries/territories sales price regulations are present, through which

minimum and maximum sales prices are dictated. In all surveyed countries sales prices

of privately-owned agricultural land are formed on the market and are not regulated by

the government. They are solely the result of an agreement between owner and tenant.



Situation is different for state-owned land. In Albania, the prices are liberalized but the

fiscal burden is dictated by the use of reference prices. In Montenegro selling prices

are not formed by the state, but the government has created a legal framework which

defines how the prices are determined. In the Republic of Srpska the tax office

determines minimum prices which are used exclusively to calculate the property tax

base. Price of state-owned land in the Former Yugoslav Republic of Macedonia is,

similarly to Montenegro, estimated based on the rules proposed by the Ministry.



6.6.2 Changes of purpose of agricultural land



Another factor that hinders an efficient agricultural land market in almost all WB

countries/territories is uncontrolled and illegal changing of purpose of agricultural land.



In Albania the owner of agricultural land is obligated to preserve and increase its

productive capacity. Furthermore, the Law on the Protection of Fruit Trees prevents the

conversion of orchards and vineyards into arable cropland, without the permission from

Land Protection Offices. They established a system for monitoring of the selling prices

of agricultural land. Majority of the transactions are smaller than 0.1 ha which indicates

that plots were generally changed from agricultural land to construction sites.



In the Federation of Bosnia and Herzegovina the Law on agricultural land forbids

sales of agricultural land for non-agricultural use, but in practice the Law is not strictly

respected. When the agricultural land is purchased with the aim to change its purpose

the land sale price is often determined with non-agricultural criteria such as landscape

beauty, view, vicinity of forest etc.



In the Republic of Srpska there are also speculative reasons for the purchase of

agricultural land based on expectations that it will be bought or expropriated for the

construction of business or infrastructure facilities or converted into building

construction land. In such cases, the buyer is ready to pay a higher price for the

agricultural land than that which would have to be used exclusively for agricultural

purposes.



The illegal changes of purpose of agricultural land in Kosovo remain another obstacle

towards developing the agricultural sector and undermine the effective implementation

of the law on spatial planning.



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After the restitution of land to former owners Montenegro is facing an increasing trend

of changing the purpose of agricultural land for residential building construction.

Through the change of purpose and permanent loss of land, the damage to agriculture

is done and also other damages and negative consequences are evident - erosion of

land, environmental pollution, destruction of cultural heritage and decrease in

attractiveness of certain areas.



In Serbia the price of agricultural land is influenced by speculative actions when it is

purchased for conversion into building land (infrastructure construction, spread of the

populated place, industrial zone, and similar).





6.6.3 Property rights


One of the most constraining factors for the development of the agricultural land market

in all WB countries/territories is unclear property rights. Property rights of the

agricultural land were privatized in the 1990s and the process still isn’t finished. Almost

all WB countries have incomplete, not regularly updated data about the ownership which

hinders the sale of agricultural land, since parcels without proper registration cannot be

sold or given for rent.



Albania is experiencing a slow and incomplete transition to reestablish property rights

after decades of state ownership of all land, followed by 25 years of unclear regulation

of private and state property. The country faces major problems with incomplete land

titling and ineffective land administration. They try to reestablish property rights after

decades of state ownership of all land, followed by 25 years of unclear regulation of

private and state property. Ownership of private property is commonly disputed

between multiple parties and land plots tend to be fragmented. Incapability or lack of

interest, of successive governments to design proper land use policy has resulted in

ambiguous land rights. This creates uncertainty and delays during land sales and

difficulties in accessing finance through banks, which often require land titles as

collateral for loans.



The property rights in the Federation of Bosnia and Herzegovina are regulated

through a complex registration system consisting of land registry and land cadaster.

Land registry is a public register of real estate rights. Keeping, maintenance and

establishment of land registers and registration of real estate and rights of real estate

in FBH are regulated by The Law on Land Registry of the Federation of Bosnia and

Herzegovina. The land registry is dated from Austro-Hungarian times and is technically

still maintained on the same grounds, except for a smaller part of the territory where a

new real estate cadaster has already been established in the basis of a new survey.



In the Republic of Srpska is currently ongoing process of merging the land register

and the cadaster, which will enable the updating of data about the ownership of

agricultural land. The Law on the Survey and Cadaster of Republic of Srpska in 2012

introduced a new system of registration of real estate and real property rights in

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Republic of Srpska. The new law consolidated records of real estate and real estate

rights into one real estate register under the authority of the administration body.



Kosovo also has incomplete data about the ownership of agricultural land. Kosovo

Cadastral Agency is responsible for the overall administration of the computerized

Kosovo Immovable Property Rights Register. The register isn’t regularly updated and

farmers don’t have a possibility on changing ownership or be eligible for any grants.



There are also many cases in the Former Yugoslav Republic of Macedonia in which

the ownership is not settled due to unregistered hereditary right, abandoned land and

the unfinished denationalization process. The cases of shared land ownership also hinder

the selling of the agricultural land, especially if some of the owners are out of the country

for a longer period of time (typically, consent of all owners is needed). Even though

many such cases have been overcome after 2007, motivated by the increased state

support, unclear or joint ownership and unfinished physical division are still present at

20-30% from the arable agricultural land.



Property-legal relations are also problem in Montenegro. Rural areas historically

belonged to the people who inhabited these areas, however, with the displacement of

the population, many agricultural parcels were left where agricultural production was

not carried out, but if someone wants to get involved in agriculture productions, cannot

make contact with the owner of agricultural land.



One of the reasons for not updating data of property rights is that farmers are not

accurate in the recording of a change of ownership and usage of land. The change in

ownership of agricultural land requires the signing of a contract and registration

ownership change in land book.



In Serbia the majority of agricultural land doesn’t have proper registration and

therefore cannot be sold. Ownership over real estate is acquired only by registration in

the real estate register. Land abandonment is typical practice, as there are no

consequences for the owner of mentioned land. Small farm households do not have

access to this land. On focus group discussion representatives from scientific institution

proposed state policy by which abandonment land will be penalized with higher property

tax.



6.6.4 Pre-emptive rights



In several WB countries/territories, when renting or purchasing agricultural land, special

provisions regarding pre-emptive rights must be taken into account. A pre-emptive right

or the right of the first refusal is one of the instruments to guide the land market in rural

areas and is defined as a right to acquire certain property in preference to any other

person in order to prevent irrational land use. Based on the outcome of the questionnaire

survey, the following forms of pre-emptive rights in WB countries/territories can be

distinguished:

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 In Albania, the Republic of Srpska, Kosovo and Montenegro, the instrument

of pre-emptive right does not exist for renting or purchasing of agricultural land;

 In the Federation of Bosnia and Herzegovina and Serbia pre-emptive rights

regarding renting agricultural land exist only for state-owned land.

In the Former Yugoslav Republic of Macedonia, pre-emptive rights exist only in the

case of selling agricultural land.



In the Federation of Bosnia and Herzegovina, the pre-emptive right for renting

state-owned land is assigned in the following order:

 Existing tenants if they fulfilled all duties from the contract;

 Households with agriculture as exclusive or dominant economic activity and with

insufficient land to ensure their economic stability;

 Households with the neighboring properties to the renting land.



Pre-emptive rights exist also in the case of selling agricultural land if the owner of the

land submits an offer to local municipality administration, which determines pre-emptive

rights in the following order:

 Co-owner,

 Closest family members;

 Family farm from the same cadastral municipality with the member capable of

conducting agricultural production;

 Municipality if the land will be used for agricultural production;

 Farmer with the registered agricultural household whose land is neighboring to

the one being sold

 Agricultural cooperative.



In Serbia, state-owned agricultural land is leased through public bid held in two rounds,

except for the right of priority lease and the right of first refusal. The right of priority

lease have registered agricultural holdings, which will invest at least EUR 500,000 in

processing capacities (minimum 500 EUR/ha), in the period up to 3 years from the date

of commencement of the investment, except in units of local self-government that have

less than 1,000 hectares of state-owned agricultural land, where the total investment

amount may be less than 500,000 EUR.



The right of first refusal have legal and natural persons that own irrigation, drainage

system, fisheries, agricultural building, hothouse, greenhouse and perennial planting

(orchards and vineyards still producing crops) located on state-owned agricultural land,

which is registered in the RAH, and holds active status for at least three years or own

domestic animals, who is also the owner, or the tenant of a facility for breeding these

animals in the territory of a local self-government unit where the right of first refusal is

exercised and which is registered in RAH and holds active status for at least one year.

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In Former Yugoslav Republic of Macedonia, the owner can offer agricultural land

for sale by public announcement. The pre-emptive right is granted to the joint owner,

the co-owner and the neighbors whose land borders the land which is sold. If more than

one person from the same group of subjects with the right to preference has accepted

the offer, the owner may offer the agricultural land to the one who offered the highest

price within that group. The holders of the pre-emptive right are obliged to declare

acceptance of the bid within eight days from the day of receiving the bid or

announcement of the public announcement, otherwise they lose the priority right and

the owner may offer the agricultural land to another legal or natural person. The owner

who offered the agricultural land for sale has an obligation to conclude a purchase

agreement with the most favorable bidder.





6.6.5 Land taxes


Another important part within sales market regulations are land taxes. The taxes should

be divided into real estate, income and land transaction taxes.



The basis for the tax of agricultural land in Albania is the surface of the agricultural

land owned by the taxpayer. Only if the agricultural land is planted with permanent

crops (fruit-plantations and vineyards) farmers don’t have to pay taxes for the first five

years. Transaction tax varies depending on the type of required document before

transactions. Registration of a land which was never documented costs 240 EUR.

Updating the documentation costs less than 10 EUR while the registration of a land

transaction costs around 30 EUR. The third tax related to agricultural land in Albania is

tax on transactions is imposed on all kinds of immovable properties and is paid by the

seller, before the registration. The level of the tax for agricultural land is 15%. Moreover,

individuals who are users but not owners of an immovable property need to self-declare

the property under use to the relevant local authorities and pay the tax on this property.

Additional costs on land transactions relate to notary expenses for immovable

properties. The costs are between 0,23 and 0,35% of the contractual value.



In the Federation of Bosnia and Herzegovina the tax on agricultural land sale is

defined by Federal Law on real estate and rights sale and it amounts 5% of the land

market value. Land sales tax is paid in the municipality to which land belongs, and it

represents municipality income. In most of the cantons, seller is supposed to pay tax,

but the law leaves possibility to parties to agree on this issue. Only in Posavina Canton

the law clearly defines land sale tax as the duty of the buyer. Tradition in the country is

that buyer pays tax, so in most cases, parties agree to do so. Cantonal administration

is authorized to determine whether and under what conditions agricultural land can be

exempted from land sale tax, which result in different situation across FBH, including

different costs of land purchase. Thus, In Canton Sarajevo and Tuzla Canton, agricultural

land purchased to conduct agricultural production is exempted from tax paying. In

Zenica-Doboj canton sales of land surfaces larger than 0.5 Ha are exempted from tax,

and in the rest of the Federation of Bosnia and Herzegovina tax is regularly paid, unless

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

municipal or cantonal council abolish the rule in order to stimulate agricultural

production.



In the Former Yugoslav Republic of Macedonia, the Law on property tax regulates

the amount of sales tax and property tax. The rates of sales tax on real estate are

proportional and amount from 2 to 4%. The minimal cost for notary fee is 50 EUR and

depends on the value of the land.



Obligation to pay real estate taxes in Montenegro is regulated by the Law on Tax on

Real Estate. The real estate transfer tax is paid by the buyer of immovable property.

The tax base for real estate turnover tax is the market value of the real estate at the

time of its acquisition. The real estate tax rate is proportional and amounts up to 3% of

the tax base. For agricultural land that is not cultivated and whose surface exceeds 15

hectares a tax rate is up to 5% of the market value of the real estate.



The tax rate on the real estate is proportional and can range from 0.10% to 1.00% of

the market value of the real estate, and its amount is determined by the municipality

by its decision, depending on the type, location, quality, age of the real estate. For

agricultural land that is not cultivated and whose surface exceeds 15 hectares a tax rate

of 3% to 5% of the market value of the real estate is determined.



In the Republic of Srpska there is no real estate tax for agricultural land. When buying

agricultural land notary expenses and land transaction registration tax have to be paid.

The amount of notary fee and land transaction registration tax depends on the value of

the contract.



In Serbia the real estate tax is between 0.1-0.4 percent of market value of agricultural

land is paid by the owner. Another tax is tax on transfer of absolute rights which is paid

by the seller and it is 2.5%. The third tax is tax on capital gains which is 15% on the

difference between the purchase and sale price of the land.



6.7 Cross-country findings



There are significant differences between WB countries/territories regarding the

duration of long term rental contracts. In the majority of WB countries/territories the

shortest lease period for agricultural land is one year, while in Kosovo it is 3 years and

in Republic of Srpska 8 years. The longest lease period is 99 years in Albania and

Kosovo while in Federation of Bosnia and Herzegovina it is 25 years. In general,

the shorter periods of lease are up to 10 years for arable land, while for permanent

crops this period is longer.



In some WB countries/territories there are also restrictions on the maximum rental area.

In Montenegro rented area for arable land and permanent crops can be between 0.5

and 5 ha and for meadows between 1 and 10 ha of agricultural land. In Republic of

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Srpska it can be up to 200 hectares for legal entities and 100 hectares for natural

persons. In Albania rented area can be up to 1,100 hectares while other countries don’t

report any limitations regarding the rented area.



The most common reason for the termination of rental contracts in WB

countries/territories is failure to comply with contractual obligations (Albania,

Montenegro, Serbia). Other most common reasons for termination of the contracts are

non-payment of the rent, change of the purpose of agricultural land and if leaser doesn’t

use agricultural land in compliance with agri-technical measures.



In almost all WB countries/territories uncontrolled and illegal changing of purpose of

agricultural land represents another major obstacle for efficient agricultural land market.

Although countries have legislation that prevents the sale of agricultural land for non-

agricultural purposes, but it is not implemented in practice.



Another constraining factor for the development of the agricultural land market in all

WB countries/territories is unclear property rights. Restitution and denationalization

processes are still not finished. They have incomplete, not regularly updated data about

the ownership which hinders the sale of agricultural land, since parcels without proper

registration cannot be sold or given for rent.



When renting or purchasing the agricultural land, special provisions regarding the pre-

emptive rights must be taken into account. In Federation of Bosnia and Herzegovina

and Serbia pre-emptive rights regarding renting agricultural land exist only for state-

owned land, while in the Former Yugoslav Republic of Macedonia pre-emptive rights

exist only in the case of selling agricultural land.



The taxes are divided into real estate, income and land transaction taxes and differ

substantially across WB countries/territories. Land transaction tax rates are different

between WB countries/territories and ranging from 0.1-0.4% of market value of

agricultural land in Serbia, 2%-4% in FYR Macedonia, 3% in Montenegro, 5% in

Federation of Bosnia and Herzegovina and up to 15% in Albania.

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7 Agri-policy measures related to land market



In the following chapter, respondents were asked to provide information about the key

aims of the agricultural policy measures related to land market in their respective

countries/territories. They described implemented measures which improve land

ownership and size structure of agricultural holdings and how those measures influence

the purchasing and renting of agricultural land.





7.1 Albania


Key aims of the Albanian agricultural policy are the establishment of viable and

competitive family farms, which are able to meet the modern market economy

requirements. This will be achieved through the development of the agricultural sector

with suitable farm structures that are oriented towards market and improvements in the

rural infrastructure. Land consolidation policy is viewed as the key mechanism to

increase the farm size and reduce land fragmentation through land rental markets.



The country has implemented several measures for the modernization of the agricultural

holdings (planting perennial crops, improving irrigation and drainage systems, and

establishing protected systems) which increased the demand for agricultural land and

fostered land rental and sale market. Special incentives are given in terms of farm

subsidies to farms bigger than 5 ha which indirectly increases the demand for

agricultural land. These have motivated the purchases of land from farmers and no-

farming communities. Moreover, the request for land in blocks of minimal size of 0.5 ha

(during 2011-2014 0.2 ha) has reduced the fragmentation of agricultural land.



Another measure, provided by the government in 2015 is that farmers don’t have to

pay 15% of the land sale tax if the land is sold for agricultural use, which reduces the

transaction costs and prevents the transformation of agricultural land into construction

land. If a farmer wants to sell land they can:

 Apply for land certificate and have approximately 70% of the costs covered by

the Municipality;

 Have tax on incomes from sale exempted if the land will be sold to another

farmer.

In the case of the subsidy scheme for planting intensive fruit plantations, government

is exempting the farmer to pay land tax for the 5 years. The land tax is also very low,

compared to other taxes.



However, many problems related to land market still exist. They relate to the regime of

property rights, particularly linked with the implementation of property transactions,

procedures for the registration of these transactions and increased payments for

registering transactions. Furthermore, appropriate legal framework for land

consolidation still hasn’t been adopted, although the national Land Consolidation

Strategy has been developed. The issue of land consolidation will be a priority for

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national policy during 2014-2020. Besides land consolidation also other support

measures and interventions will be considered. Further legal amendment will be adopted

to promote the land market. The following initiatives are envisaged to facilitate this

process:

 Enhance the functioning of the land market through an improved legal

framework, streamlining the administrative procedures and reducing the costs of

transactions;

 Provide support to land consolidation and re-parcelling.

The government is currently aiming to foster the registration of land and issuing of land

tittles for those farmers who didn’t acquire a land ownership certificate till 2017. Even

the ones that already have a land title will go through the re-measurement process.

Before 2017, each farmer could apply individually to obtain the certificate. However,

since no one showed willingness to sell land and to apply for credit/loans, and moreover,

since, during the period 1991-2016, they informally acquired more land, no one

preferred to apply for the land ownership certificate. In 2017, the Government gave the

Municipalities the task to support farmers for applying for land ownership certificate.

The deadline for the completion of the process is set to December 2018. The costs will

be covered by the municipalities which are requested to prepare the documentation

based on application of the farmer. Until now, the process has been slow due to lack of

willingness and low information, since only less than 30% of the farmers have applied.



7.2 Federation of Bosnia and Herzegovina



Main objectives of the agricultural policy related to agricultural land in Federation of

Bosnia and Herzegovina are to preserve purposeful and rational use of agricultural land,

to prevent its use into non-agricultural purposes in order to produce safe food, protect

the health of humans, plants and animals and ensure no harm to environment.

Agricultural policy measures aimed to improve land ownership and size structure of

agricultural holdings have not been implemented on regular basis but rather periodical.



There is only one measure that the Ministry of agriculture, water management and

forestry conducts continuously. They transferring the funds collected from the charges

for change of purposes of agricultural land to land remediation and improvement. In the

year 2016 they were allocated almost 1.25 million of EUR to improve 171 hectares of

agricultural land. Also the funds which are collected from state-owned land renting are

allocated for land improvement measures.



During the 2004-2010 period, three programs related to land management and

protection were subsequently included into budgetary support to agricultural producers.

The first one was called “Remediation of the neglected and degraded agricultural land”

and it was implemented from 2004 to 2006. During this period, more than 400 thousand

were allocated and 1.638 ha of agricultural land were encompassed with it. The measure

“Enlargement of farm size” was implemented only in 2007and more than half a million

EUR was allocated for 314 applicants for purchase of minimum 0.3 ha to maximum 5

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ha of agricultural land. The third Program called “Improvement and protection of

agricultural land” was financed within the rural development measure for next three

years (2008-2010). Approximately one million EUR were allocated during these three

years and approximately 1,000 ha of agricultural land were encompassed with the

measure. Within last few years, there is a measure called “Capital investment”. The

measure is aimed to support farms in acquiring capital assets, including agricultural

land, by subsidizing interest on agricultural loans. Around 1,2 million EUR was allocated

in 2017 for this purposes which represented 3.5% of total budgetary support to farmers.

The problem with this measure is that it isn’t permanent and fixed. Thus, in 2016, there

was a lack of funds for direct payments for agricultural producers, so the money aimed

for capital investments was just transferred for these purposes, and there were no funds

left for interest subsidizing.



Currently, there are some activities, which are expected to contribute to the

development of the agricultural land market. Strategy for the Development of the

Agricultural Sector in Federation of Bosnia and Herzegovina (2015-2019) was adopted

but there still no significant changes in the manner budgetary support is allocated and

distributed, and no progress has been made so far toward focusing measures relevant

to land policy and to facilitation and improvement of agricultural land market. Secondly,

a complete property cadaster and the on-line real estate cadaster are being developed.

Activities are ongoing on the completion of determining the prudential categories of

agricultural land in the entire territory according to the single prescribed methodology.



Based on respondent’s assessment, agry-policy measures do not stimulate purchase

and renting of agricultural land. It could even be stated that the structure and amount

of budgetary support discourage land purchase and hinder land market development.





7.3 Republic of Srpska


In 2009, the Program of Protection, Use and Systematization of Agricultural Land of

Republic of Srpska was adopted as a component of the land use planning process. In

this program, the existing status of land and land space were determined, the land

monitoring was proposed and the measures for protection, regulation and use of

agricultural land have been established. During the period 2016-2020 the Strategic Plan

for the Development of Agriculture and Rural Areas was developed whose goal is to

increase the volume of agricultural production. Among its measures are switching direct

payments to payments per hectare, adopting the necessary legal and subordinate legal

legislation for a more efficient settlement of property-legal issues related to agricultural

land, developing and updating programs for the use of state agricultural land, i.e. its

granting under concession or rent and establishing land parcel information system

(LPIS) in the function of a more efficient monitoring of the specific use of agricultural

land. So far, most of the plan’s measures in the field of agricultural land have not been

realized.



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The only active measures to improve the status of agricultural land are the rent of state

agricultural land and the investments in provision of irrigation on the significant areas

of the most fertile land. There is no support for land consolidation. In a certain way,

agricultural subsidies allocated per unit of land affect the increase in the degree of

cultivation of arable land. The procedure of unifying cadastral and land registry is also

an indirect measure that promotes the intensive use of agricultural land.



Currently, the land administration is working on updating real estate records, which also

includes records on agricultural land. New surveys were carried out in order to re-

categorize agricultural land. The Ministry, in order to protect the state agricultural land,

initiates court proceedings on usurped land and registers the right of disposal over land

owned by the state.





7.4 Kosovo


In Kosovo, key aims of the agricultural policy in the field of agricultural land market are

to increase the size of the family farms, protect the agricultural land against unplanned

urban development, land regulation and environmental protection. Different measures

are implemented to improve land ownership and farm size structure, which also have a

direct influence on purchasing or renting of the agricultural land such as:

 Updating cadastral data;

 Realization of land consolidation projects for the period 1983-1989;

 Regulation of agricultural land with voluntary access;

 Irrigation projects;

 Subsidies and grants from the Government of Kosovo;

 Increase of the information and transparency in the land market activity;

 Improvement of the Land Management System.

So far, improvements have been accomplished in the land consolidation measure.

Sufficient legal base and base of cadastral documentation of the actual situation in the

field have been established. Community was informed about the land consolidation

strategy and its benefits and land consolidation has been successfully implemented for

long term period.

7.5 The Former Yugoslav Republic of Macedonia



The key aim of the agricultural policy in the Former Yugoslav Republic of Macedonia is

to introduce active policies for consolidation of the agricultural land. In 2012 Country

has adopted National strategy for consolidation of the agricultural land for the period of

2012-2020 whose goals are reduction of the fragmented land parcels by their grouping,

improvement of their form so to adjust them for application of advanced production

techniques and technologies, increasing their average size and providing access to the

parcels to new or rehabilitated irrigation systems and to upgraded or newly built road

infrastructure.

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Besides land consolidation the strategy identifies different measures that promote the

improvement of agricultural land structure such as:

 Providing information on the land market (database);

 Improvement of the credit market to support land consolidation;

 Decrease of the taxes for land transfer;

 Farm inheritance by a single person;

 Introduction of taxes for agricultural land that is not used for agricultural

purposes;

 Common ownership and not completed processes of arondation.

There are no other direct measures, or other budgetary support for buying or renting

land in the country.





7.6 Montenegro


Montenegro has no direct measures when it comes to the agricultural land market.

However, there are some indirect measures for rational use of land, protection of

agricultural land, prevention of land abandonment and land improvement such as land

consolidation operations, irrigation etc.



Measures of agricultural policy influence the increase of agricultural production, and

hence the purchase and renting of agricultural land. The threshold for participation in

public calls for investment support is 2 ha of agricultural land. This way, the farmers are

motivated to buy or lease additional land. There is also support for many types of

agricultural production. Depending on type of production, farmers need from 0.3 to 1

ha of land to be eligible for that support, which additionally motivates them to buy or to

lease agricultural land.



The main activities in the coming period will be the adoption of the new Law on

Agricultural Land. The Ministry of Agriculture and Rural Development has initiated a

project for the preparation of new legal and strategic documents for the management

of agricultural land in order to create a good framework in this area for further

development of agriculture in accordance with the current agricultural policy, the needs

of agricultural producers and new requirements in the process of joining the European

Union.



The improvement of regulations should also contribute to the more efficient

implementation of one of the priorities of the Government to better valorize state-owned

agricultural land, as a resource that is recognized as under-utilized and the potential for

further growth in agricultural production, investment and employment.

The basic goals of the new law are as follows:

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 Urgent valorization of agricultural land (establishment of information LPIS

system, renewal of classification and methodology for the assessment of

agricultural land);

 Protection of agricultural land from all forms of change of purpose, different

degradation, protection against harmful effects, acidification and other negative

processes;

 Transfer to credit rating for the purpose of changing tax policy, determining the

basis for leasing and determining the best agricultural land and changing the

purpose of agricultural land and determining the income of the agricultural fields;

 Tax base for unprocessed areas;

 Measures of protection from further fragmentation of the parcel structure and

the consolidation of agricultural land;

 Obligatory identification of state land and determining the basis for leasing in

accordance with a certain methodology;

 Introducing measures for better land use.





7.7 Serbia


In Serbia, increase of financial support per unit of land directly affects the purchase and

renting of agricultural land. Between 2002 and 2005, farmers could get budgetary

support for the purchase of agricultural land, which is now no longer available. Farmers

can get public support for land consolidation, irrigation and other operations. Also,

Development Fund of the Autonomous Province of Vojvodina is approving the long-term

loans under more favorable conditions for registered farmers in Vojvodina region for the

purchase of agricultural land. In 2017, total 1.1 million EUR of long term loans for the

purchase of agricultural land were approved.



There are also several measures which indirectly improve structure of agricultural

holdings such as public support for land consolidation, drainage, irrigation, organization

of field roads, improvement of agricultural land quality etc. Budgetary support for the

purchase of agricultural land which it was active during the period 2002-2005 is no

longer available.



7.8 Cross-country findings



The key aims of the of land market policy in all WB countries are to increase farm size,

reduce fragmentation and promote rational use of agricultural land. In general it can be

concluded that in all WB countries/territories some direct or indirect measures which

improve functioning of land market were implemented, but a lot of those measures were

implemented only for a short period of time and with rather low budgetary support.

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries



Some countries/territories (Albania, FYR Macedonia, Kosovo) have adopted land

consolidation strategies, but the proposed measures have not been fully implemented

yet.



Among the measures which improve the agricultural land there are investments in rural

infrastructure and improvement of agricultural land quality (Federation of Bosnia and

Herzegovina, Republic of Srpska, FYR Macedonia, Serbia) but also these measures are

not implemented continuously.





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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

8 Agricultural credit market in Western Balkans



In this chapter, agricultural credit market in WB countries/territories is described as

access to credit is an important factor in land availability to farmers. Respondents were

asked to provide information about the regulatory framework, governmental support in

the agricultural credit market, main providers of credit to agricultural holdings, most

common reasons for rejecting credit applications, possibilities of a farmer to obtain

credit in comparison with big farms or other rural-based small firms and typical

conditions of agricultural credits.





8.1 Albania


In Albania, the share of overall credit in agriculture in 2017 amounted to 5.2 million EUR

or slightly more than 1% of the overall credit volume in the country. The share of credits

provided to agriculture is declining. In the period 2000-2005 the share was 2% to 2.5%

and fell to 1.2% in the recent years. There are banking and non-banking institutions in

the country, of which the non-banking institutions are more widespread and more

important on providing credit to agricultural sector.



The most active organizations which providing credit and other financial services to rural

areas are the micro-finance institutions (MFI) and the Savings and Credit Associations

(cooperative banks). In the last years, agricultural credit has been mainly provided by

MFI, which also considerably reduced their interest rates. However, it is estimated that

microcredit finance institutions cover only 10-15% of rural businesses’ and households’

demand for credit. Based on the findings of the focus groups, there has been a demand

only for short-term loans for greenhouses and other investments but not for land

purchases.



In general, investments in agriculture are very low in Albania. The reasons are due to

small scale farming, limited internal resources of farmers, and difficult access to credit.

Supply of bank credit to agriculture is constrained by structural problems of the sector,

including small size of farms, ageing of farm population, lack of assets to be offered as

collateral, underdeveloped land market, lack of information regarding the applicants’

financial standing and other reasons. Limited availability of land as a collateral is related

to the absence of a functioning land market and to the unclear land property rights.

Farming also represents a high risk especially at production level, due to the absence of

insurance schemes and uncertain access to market, as formal production contracts

between producers and clients (traders, processing industries) are quite rare and

uncertain in actual application.



8.2 Federation of Bosnia and Herzegovina



The access to agricultural credits presents one of the main obstacles towards

development of this sector. There was a significant decrease in the number of

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

commercial banks from 40 in 2000 to 15 banks in 2018. Besides 15 commercial banks,

one state-owned development bank and 12 micro–credit organizations (MCOs) are

currently licensed for work. Not all commercial banks offer special credit lines for

agricultural production, investments in agriculture or for working capital. In those,

farmers can apply for loans under the same conditions as the subjects from other

economic activities. The Development Bank of the Federation of Bosnia and Herzegovina

offers a tailor-made credit line for agriculture that recognizes biological and economic

specificities of agriculture (longer repayment period, longer grace period, lower interest

rates). MCOs mostly offer small scale loans for agriculture, including loans for small

farmers.



According to the World Bank data there are no significant changes in the amount of total

agricultural credits, or in the share of the sector in total credit amount. Thus, the share

of credits for agriculture, forestry and fishery in total credit to economy ranged from

2.6% in 2007 to 2.3% in 2015. This share exceeded 3% only in 2009 (3.3%) and has

been constantly slightly decreasing ever since. Although some additional credit lines for

agriculture were placed by commercial banks, or by other funds via commercial banks

it is obvious that the total amount of credits to agriculture has been decreasing. The

reason for such situation is not poor availability of credit but inadequacy of credits

condition for sensitive, risky and specific economic activity such as agriculture and

incapability of agricultural producers to fulfil requirements to get their loan application

approved and to repay liabilities on time.



Government provides support mainly in the existence of a credit line for the financing

of the agricultural production of the Development bank. However, there are numerous

factors that make this line of credit acceptable only to large, commercial farms, while

small farmer’s access to these loans is difficult or impossible. The most significant

among these factors are:

 The line is intended exclusively for a registered farm;

 The required collateral is high (1.5:1 for real estate and 2:1 for movable property

that cannot be exclusive collateral but only in combination with real estate);

 Complex and complicated application procedures and obligation to submit a

business plan.

Another form of support is subsidizing interest on agricultural credits, but this kind of

support does not make it easier for small farmers whose loan applications are rejected.

Besides, this measure is not permanent but occasional, and it depends on available

agricultural budget.





8.3 Republic of Srpska


In Republic of Srpska, agricultural credits can be approved by commercial banks,

microcredit organizations (MCO) and savings and credit organizations. In the last ten

years the number of commercial banks is decreasing as the consequence of

consolidation of banking sector. Commercial banks' credit activities are stagnating, and

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

average interest rates have fallen slightly. In 2017 operated 8 banks with headquarters

in Republic of Srpska and branches of additional 7 banks from Federation of Bosnia and

Herzegovina. The number of MCOs on the other hand is increasing because several new

MCOs are being established with the simultaneous liquidation of some old MCOs. In

2017, there were 9 MCOs with headquarters in Republic of Srpska and 8 additional MCOs

based in Federation of Bosnia and Herzegovina. The government has also established

an Investment-Development Bank that offers a special credit line for micro-business in

agriculture.



Generally, agricultural credits are not available to a sufficient extent. In 2016, the share

of loans to agriculture, aggregated by banks and MCOs and compared to overall amount

of loans was only 3.4%. Banks are reluctant to credit agricultural producers in the status

of physical persons (e.g. small rural households) who are therefore primarily oriented

towards getting MCO credits, which are less favorable under repayment terms, grace

periods and interest rates.



Through the facilitation of the state-owned Investment-Development, Republic of

Srpska has tried to provide additional favorable sources for crediting, especially for

agriculture. This bank acts as a fund, as credits to end users are approved through

financial intermediaries (banks and MCOs). These credits are more favorable but

financial intermediaries are reluctant to offer them, as they are competing for their more

expensive credits. Earlier, the Ministry of Agriculture subsidized the part of interest rate

on agricultural credits, but this measure has not been in use for 10 years and is not

planned by strategic documents in force. There is also a Guarantee Fund of Republic of

Srpska that approves loan guarantees, including loans for agriculture and land purchase.

Some IFAD-funded projects have special credit lines for small poor agricultural

households. This way of supporting small farms in their recent projects has been

replaced by grants of up to 40% of the value of the investment, but this support is

limited per beneficiary.





8.4 Kosovo


In Kosovo, agriculture is the least credited sector by financial institutions. In 2016, the

share of credit to agriculture compared to overall credit volume in the country was only

4.2%. Agricultural loans are recognized as non-repayable loans, therefore lending has

a high cost from banks and microfinance institutions (MFI) to farmers. This low level of

lending highlights the conservative approach of the banking system. The lack of the

insurance system in agriculture also greatly affects farmers' access to loans,

respectively to affordable loans. Also, interest rates on loans to the agricultural sector

are high compared to other sector loans and regional countries, which do not stimulate

the development.



The Ministry of Agriculture, Forestry and Rural Development (MAFRD) provides support

to investments in agriculture with Guarantee Fund. To provide loan guarantees in

agreement with the six main banks of Kosovo in issuing loans, while increasing the

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

access to credit in agriculture and agribusiness, this fund contributes in total value about

23.5 million EUR, where MAFRD has a share of 2.5 million EUR. Additionally, taking into

consideration that agriculture in Kosovo is the main economic activity, banks have made

a progress by reducing the annual interest rate in average 2% for agro-loans, and it has

also enabled that for agricultural investment loans to extend the period for returning

these loans for up to 84 months. Every individual that possesses cattle or farming land

and secures the income by selling the agricultural products is eligible to be financed by

bank.



8.5 The Former Yugoslav Republic of Macedonia



Today, around 40% of the investments and operating activities in agriculture in the

Former Yugoslav Republic of Macedonia are credited through the commercial banks and

saving houses. Today, there are 15 licensed commercial banks who are the main

providers of credit to agricultural holdings. Commercial banks mainly are targeting

agricultural companies, except small banks, which see the small farmers as potential

clients. On the contrary, saving houses mainly provide microfinance services to micro

and small farmers. There is an informal credit market as well, which seems to be

preferred by the agricultural holdings. This includes loans from relatives, friends, and

unauthorized persons.



An increased participation of the commercial banks in crediting the agriculture in the

last years is due to the establishment of the Agricultural Credit Discount Fund (ACDF).

The purpose of the credit lines of the ACDF is to improve the access to credits of the

individual agricultural producers, the small and medium agricultural companies, the

processors and exporters and to the applicants to the IPARD program.

There are also other donors (such as USAID, etc.) and a small number of international

financial institutions that support certain credit lines intended for development of the

agriculture.



The lending volume of the financial institutions to agriculture is very small. In the last

quartile of 2017, the total lending volume to agriculture (including forestry and fishery)

was only 1% from the total lending activities of the financial institutions to other sectors.

As a result, the investments in agriculture are very low. The total investments in fixed

assets in 2016 was 2.4%. About 78% of the total lending volume of the financial

institutions belongs to credit lines supported by the ACDF. The saving houses reduced

their share in crediting the agriculture unlike the beginning of the establishing the ACDF.

However, currently one project ‘Microfinance Inclusion and Innovation’ is running to

increase the participation of saving houses and small banks in providing microfinance

services to SMEs in agriculture.



However, the accessibility to banks is restricted to rural areas that are not close to urban

areas. Today, the main target of large banks for crediting are the agri-food companies,

while small banks and saving houses have special microfinance services and they mainly

target small farmers.

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





8.6 Montenegro


The agricultural credit market in Montenegro is divided into two parts. The first part

refers to the loans provided by the Government of Montenegro through the Investment

and Development Fund (IDF), and another part are loans offered by very few banks. In

the past ten years, the situation in Montenegro regarding the granting of loans to

agricultural producers has improved. The IDF was established, several banks provided

targeted agricultural loans, and several smaller microcredit institutions were

established, which are solely engaged in lending to farmers.



The IDF has defined stimulating financing conditions for agricultural producers and

companies. Loans are designed for supporting investments in agricultural holdings in

accordance with the Call of the Ministry of Agriculture and Rural Development of

Montenegro. Lending conditions are:

 Interest rate of 3,00% annually with the proportional interest calculation

method;

 Maximum term of 12 years (including grace period);

 Grace period up to 4 years.



The banking sector recognized the need for agricultural producers to borrow money to

start farming, but interest rates and general conditions are extremely unfavorable for

the agricultural producer. Concrete changes occurred in terms of lending by the state,

because now the loans are available for small farms that want to improve and expand

agricultural production. It is far more difficult for new agricultural farms, as the

procedure for obtaining a loan is much more complex and the system of trust is different

in relation to agricultural holdings already engaged in agriculture. However, new

agricultural holdings can compete for small investments through public calls from the

Ministry of Agriculture and Rural Development, and this support is from 30% to 50% of

the investment.





8.7 Serbia


In Serbia, there are no financial organizations specialized for credit support to

agricultural holdings, warehouse receipts market is underdeveloped as well as a system

of pre-harvest financing. Nevertheless, agricultural credit market has been significantly

improved over the years (SEEDEV, 2017).



Commercial banks have a key and dominant role in lending to farmers in Serbia. There

are currently 29 banks registered for deposit and credit operations and there is a

growing competition among them. Each bank defines agricultural loans through its

business policy, determines the creditworthiness of the client and assesses the level of

risk (client’s solvency, indebtedness, risk of credit recovery, etc.) according to the

methodology of the National Bank of Serbia. The role of commercial banks is growing

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

with the credit support programs (subsidized loans) provided by the Ministry of

Agriculture, Forestry and Water Management, as well as with credit support (subsidizing

interest rates on short-term agricultural loans) provided by units of local self-

government, which assign funds for these purposes from their own budgets.



In Vojvodina region exist also two development funds and one guarantee fund. These

funds, through their favorable credit policy (interest rates of 1-3% per annum; relatively

favorable repayment periods; support to farmers in securing loans), provide farmers of

this region with more favorable conditions of lending in relation to market conditions

and in relation to the conditions offered to farmers in the other 3 regions of Serbia

(Belgrade region, region of Šumadija and Western Serbia and the region of South and

East Serbia).

According to the data from the National Bank of Serbia total portfolio of agricultural

loans approved by commercial banks in Serbia, as of 30th November 2017 (data from

the National Bank of Serbia) is 1,035 million of EUR. Around 470 million of EUR were

granted to registered agricultural holdings while about 565 million EUR were granted to

companies in the agriculture, forestry and fishery sector. The long-term loans account

for 77% of the total portfolio for agricultural holdings, while the short-term loans

account for 22%.



The agricultural credit in Serbia in the past 10 years is characterized by the following

trends:

 The number of creditors has not significantly changed;

 The portfolio of agricultural loans is continuously growing

 The number of clients is constantly falling for the last four years, which clearly

indicates an increase in the average size of the loan. Today, around 50,000

farmers took out loans (SEEDEV, 2017) or about 8% of the total number of

agricultural holdings covered by the Census of Agriculture 2012;

 Interest rates have been significantly reduced (compared to 2010, they are lower

on average by about 30%), (SEEDEV, 2017);

 There has been a noticeable decrease the share of bad loans in the total

placements to the agriculture sector since 2014 (SEEDEV, 2017);

There is still a small share (only about 22.6%) of short-term loans for financing the

production cycle in relation to the total credit instruments directed by banks to

registered agricultural holdings.



8.8 Cross-country findings



Respondents’ answers show that a big farm/small agricultural firm has a somewhat or

much greater possibility to obtain credit compared to small agricultural holdings in all

of the surveyed countries/territories (Table 13). In the Federation of Bosnia and

Herzegovina, Kosovo, the Former Yugoslav Republic of Macedonia and

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Montenegro small farmers are perceived as having far less possibilities while in

Albania, Republic of Srpska and Serbia their possibilities are somewhat smaller.



The main reasons are that small farmers often do not have permanent and high income

and so they are considered riskier clients, do not have enough collateral to offer as a

guarantee for credit repayment and do not keep production and financial records in

contrast to bigger farms. In the Federation of Bosnia and Herzegovina the vast

majority of small farmers are unable to provide the required collateral. In this way, they

are not able to achieve credit history and reputation in banks that would qualify them

for future credits. They are forced to look for loans for small-scale investment and

working capital in MCOs. Procedures to obtain credits are simple and quick, collateral is

not required as well as business plan. However, the interest rates are extremely high.

In the Former Yugoslav Republic of Macedonia, small farms sometimes have the

same or even greater opportunity to get the credit, if they are considered prospective,

developing and innovative.



Table 13: Assessment of the possibility of a farmer to obtain a loan in comparison with

big farms or other rural-based small firms



AL





BiH


BiH (RS)

KO

MAC

MN





SR


(FBiH)

Far less



+



+

+

+



Somewhat less

+



+





+

Same





Somewhat greater





Much greater





Table 14 lists the most common reasons for rejecting credit applications in according to

the respondents’ opinions. The top three reasons in all surveyed countries are

insufficient farm business income, lack of collateral and insufficient household income.

One of the reasons for rejection of the loan in the Former Yugoslav Republic of

Macedonia is also inefficient and not sustainable investments. The least important

reasons are the lack of appropriate farming or management education (in none of the

countries), insufficient business plan (only in Kosovo) and a weak previous relationship

with the creditor (only in Albania). In general, in all WB countries/territories the

business-related reasons are more important than the more personal reasons

(education, experience and relations).



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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

Table 14: Most common reasons for rejecting credit applications in WB

countries/territories

BiH





BiH





AL


(FBiH)

(RS)

KO

MAC

MN





SR


Lack of appropriate farming or





management education or experience

Insufficient farm business income

+

+

+

+

+

+

+

Insufficient household income

+

+



+



+



Weak previous relationship with the

creditor

+





Poor credit history of the applicant





+



+



+

Lack of collateral



+

+





+

+

Insufficient business plan





+





Table below (Table 15) shows typical conditions of agricultural credits in WB

countries/territories.



Table 15: Typical conditions of agricultural credits in WB countries



AL





BiH


BiH (RS)

KO

MAC6

MN





SR


(FBiH)

Max. amount

1,500-

5,000-

25,000-

3,000-

500-

Up to

5,000-

of credit (EUR)

2,4001

50,000

250,000

100,000

250,000

15,000

50,000

Interest rate

(%)

5-102

3.4-113

3.8 – 75

8-274

6-8 7

3 -13

8.5-9.9

150 –

Mortgage,

120-150%

200% of

bill of 100-150%

Real or

Guarantor

Client’s

Collateral

of value of

value of

exchange,

of value of

movable

sor promissory

the credit

the credit

Guaranty

the credit

estate mortgages

notes

fund

Duration of

240-300

12-144

60-120

36-120

48-96

Up to 100

up to 84

credit (months)

Minimum

participation

n/a

n/a

n/a

1.000 EUR

20%

n/a

20%

with equity

Grace period

(months)

15 days

0-36

12-36

3-18

6-24

Up to 48

Up to 12

1 For short-term investments

2 Real interest rate; in MFI the rate is 17-24%

3 Refers to effective interest rate. In MCOs it ranges from 10.6% to 20.1%

4 Nominal interest rate

5 Average effective interest rate; in MCOs it is 20.5%

6 Data refers to credit terms for fixed assets of commercial banks’ own credit programs for agriculture

7 Annual fixed interest rate

n/a – not available



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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries





In Albania, the loans are usually used for the purchase of small machinery (equipment)

as well as for purchasing livestock (cattle or small ruminants). Maximal amount of credit

is up to 250,000 EUR (Republic of Srpska, the Former Yugoslav Republic of

Macedonia). Maximum amount of credit usually varies with different credit institutions

and for different purposes. In Republic of Srpska this amount of credit is given by IDB

credit line, while commercial banks and MCOs provide loans up to 25.000 EUR. There

are no credit lines exclusively designed and adapted for the purpose of buying

agricultural land.



The interest rate varies between 3% and 13%, while in Kosovo it can reach up to 27%.

It depends on the amount of the loan and its maturity. Interest rate is usually higher in

non-banking institutions, such as microfinance institutions, where it often reaches 20%

and more.



There are various ways of securing the credits in the WB countries/territories. The

collateral is usually up to 200% of the value of credit (Albania, Federation of Bosnia

and Herzegovina, Kosovo), mortgage on other real or movable estate, bill of

exchange, guaranty found or client’s promissory notes. In Montenegro, required

security instruments depend on the amount of credit:

 For amounts up to 3,000 EUR - one guarantor;

 For amounts ranging from 3,000.01 to 10.000 EUR - two guarantors;

 More than 10,000 EUR - three guarantors or mortgages.

The duration of agricultural credits depends on the loan’s use and is typically up to three

years for operating capital and up to twelve years for larger investments. In some

countries (the Former Yugoslav Republic of Macedonia, Serbia) minimum 20%

participation in equity is required and in Kosovo it is 1000 EUR. Four WB

countries/territories, except Kosovo and Federation of Bosnia and Herzegovina reported

the existence of grace period for repayment of the credit. The length of the grace period

depends on the type and duration of the credit. The longest grace period is up to 48

months in Montenegro.



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9 Conclusions and recommendations


This publication presents the selected results of the Tasks 1, 2, 3 and 4 of the project

“Land Market Development and Small Farms’ Access to Land in the Pre-Accession

Countries”, which was initiated in order to strengthen the understanding of the

functioning of land market in the Western Balkan countries/territories and its

implications for small farm households’ access to land. Results are based on completed

survey questionnaires and findings of the focus group discussions.



Main limitations of a prepared study are the lack of accurate and reliable data. A lot of

data is simply not obtainable, too general or not enough accurate because of the

absence of available official statistics. Tables include different reference data or expert

estimations, so the data is also not fully comparable between all countries/territories.

Also, the countries/territories have different definitions for agricultural holdings or for

utilized agricultural area which makes comparative analysis difficult. Based on these

findings, it is hard to make solid conclusions and the values represented are of

orientational nature.



Nevertheless, important effort was made towards the improvement of land market

development in WB countries/territories. Respondents and key stakeholders,

researchers and decision makers who attended focus group discussions proposed

relevant policy recommendations which should be taken into consideration if the

countries want to modernize the agricultural land market and make it comparable to EU

level. On the basis of the results from questionnaires and especially findings from focus

groups, it was possible to identify the key problems that the Western Balkan countries

face in the field of land market development and which are represented below. First,

conclusions by individual countries/territories are given, followed by cross-country

conclusion and policy recommendations.





9.1 Albania


Albanian land market is poorly developed and non-functioning. With 1.2 ha per

agricultural holding, farm size is on average the smallest among surveyed countries.

Agricultural land is extremely fragmented, which is the result of land privatization

process that began in 1991. The biggest obstacles regarding land market regulations

are incomplete land titling, ineffective land administration and complex administrative

procedures. Majority of farmers still haven’t received officially recognized land titles and

many plots of land are overlapping when registered. In some cases more than one

person is the registered owner which creates disputes. This creates uncertainty and

delays during land sales and difficulties in accessing finance through banks, which often

require land titles as collateral for loans.



Sales market of agricultural land is poorly developed due to unclear property rights,

limited access to information on available agricultural land and unwillingness to sell

agricultural land (strong emotional ties) inherited by ancestors. Only little amount of

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land is sold every year and there is no sale of state-owned land until the pre-1945

farmers will be compensated. After sale, agricultural land is often changed into land for

construction. Rental market is slightly more developed and more flexible than the sales

market. The big majority of rental contracts are informal, based on trust and short term

agreement. Also, it is hard to obtain reliable data on land market activity, as there is no

official register of sale and rental transactions.



The share of credits provided to agriculture and fishery is the smallest among surveyed

countries and it is only 1% of the overall credit volume. Small farms have somewhat

less possibility to obtain credits than bigger farms or rural companies. The main

obstacles of rural businesses and households in accessing bank credit are lack of

collateral, which is related to the absence of functional land market and to the

unresolved issue of land property rights, risk of agricultural production and low income.



Main obstacles towards development of agricultural land market can be summarized as:

 Small average size of farms;

 Extreme land fragmentation

 Low number of rental and sale transactions;

 Unfinished privatization process;

 Generally informal rental market;

 Unclear property rights;

 Fuzzy legislative provisions and their ineffective implementation;

 Illegal changes of agricultural land use;

 Lack of reliable data and information on land market;

 Land abandonment;

 Poor access to credit.



Taking all these issues into consideration, access to land is problematic for agricultural

sector, especially for smaller farms.



9.2 Federation of Bosnia and Herzegovina



In the Federation of Bosnia and Herzegovina, agricultural land market is unregulated

and dysfunctional. There is lack of reliable data and information even on farm number

and size structure (no agricultural census). Although there is a good legal framework

for establishment and functioning of the land market, this process is slow and inefficient.

Law on agricultural land is being violated in many crucial issues, especially in land sale

procedures and changing the purpose of agricultural land. Among biggest obstacles are

also unfinished restitution process, structural problems of agriculture and missing or

inefficient institutions. High decentralization in decision-making processes leads to

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insufficient subordination and coordination, which endangers implementation of the

existing laws and aggravate adoption of the missing ones.



Register of agricultural land and cadaster are not updated. They are unreliable,

uncoordinated and un-harmonized with the new modern cadaster which is not

established on the entire territory. Farms in the Federation of Bosnia and Herzegovina

are very small and in poor economic position. They are unable to provide the required

collateral when applying for credit. In this way, they are not able to achieve credit

history and reputation in banks that would qualify them for future credits. The lack of

access to agricultural credits discourages farmers to expand their activities and to invest

into land.



Main obstacles towards development of agricultural land market can be summarized as:

 Land fragmentation;

 Lack of reliable data and information on land market;

 Complex and inefficient administrative organization;

 Unfinished restitution process;

 High decentralization in decision-making processes;

 Violation of law in practice, corruptive activities;

 Lack of support measures for regulating and establishing the land market;

 Poor access to credit.





9.3 Republic of Srpska


The Republic of Srpska does not have precise and reliable data about land surface,

ownership and land structure (no agricultural census). Farm register does not include

data on all agricultural households, as registration is voluntary.



Agricultural credits are not available to a sufficient extent, especially to physical persons.

Banks are reluctant to credit small rural households because of limited income, lack of

financial records on production and lack of collateral. Small farms are therefore primarily

oriented towards getting credits from micro credit organizations, which are less

favorable in terms of repayment, grace periods and interest rates.



Main obstacles towards development of agricultural land market can be summarized as

 Absence of accurate and reliable data on the agricultural land area and farm

households;

 Poor economic position of family farms;

 Unrealistic categorization of agricultural land;

 No sanctions for abandoning the agricultural land;

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 Poor information on offer and demand of agricultural land;

 Speculative buying of agricultural land;

 No regulation and measures to discourage further land fragmentation and no

stimulations for land consolidation.





9.4 Kosovo


In Kosovo, agricultural land market is not enough functional. Very small amount of the

land is offered on the market every year. Farms are on average very small and

fragmented, which is a result of inheritance system. The use of agricultural land is

inefficient because of land fragmentation, heritage customs, and informal relations in

the land market. Illegal changes of purpose of agricultural land into construction land

undermine the effective implementation of the law on spatial planning and rapid

urbanization has a significant impact on the land markets in certain areas, mainly in the

transition from agricultural to urban land use and the urban influences on periurban

farmland prices. Because of lack of statistics, there is no precise data on how much land

is lost every year. Institutional developments and land reforms have not contributed to

significant changes in agricultural ownership, operational structures, or land market and

land leasing arrangements. Little is being done to implement land consolidation schemes

to help ensure the economic viability of agricultural holdings as well.



Agriculture is the least credited sector by financial institutions. Small farmers have very

limited access to credit. Main reasons are poor economic position, poor credit history

and insufficient business plan.



Main obstacles towards development of agricultural land market can be summarized as:

 Predominance of small farms with inefficient production;

 Extreme land fragmentation;

 Low activity of agricultural land market and lack of information and transparency

in the activity of the land market ;

 Incomplete data on ownership;

 Illegal changes of purpose of agricultural land;

 Speculative buying of agricultural land;

 Poor land management system;

 Poor access to credit.

9.5 The Former Yugoslav Republic of Macedonia



The agricultural land market in the Former Yugoslav Republic of Macedonia is not enough

functional and dynamic. Limited amount of land is offered for rent and purchase. Main

factors are unclear property rights due to unregistered hereditary right and unfinished

denationalization process, land abandonment and shared ownership. Agricultural land

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is very fragmented and the process is further fed by low economic growth and lack of

social security. The main way of transferring agricultural land remains through the

inheritance of the land that leads to further reduction of the property. Credit market is

also inefficient and the lending volume to agricultural sector is very small. Farmers don’t

have enough working capital to buy new land and access to credit is limited due to high

interest rates, the lack of securing loans and the rigorous attitude of the bank credit

policies for the rural population.



Main obstacles towards development of agricultural land market can be summarized as:

 Small average size of farms;

 Land fragmentation due to inheritance;

 Land abandonment;

 Unclear property rights;

 Unfinished denationalization process;

 Poor economic position of farmers;

 Poor access to credit.





9.6 Montenegro


In Montenegro, there is lack of information on agricultural land and market activity. The

biggest obstacles for the functioning land market present land fragmentation of

agricultural area, unclear property-legal relations, the risk of agricultural production and

change of agricultural land use for non-agricultural purposes (construction). Many areas,

related to agricultural land and its use are not regulated properly or not regulated at all,

because the current laws are outdated. Poor land management results in land

degradation and destruction. Montenegro also has no direct measures when it comes to

the agricultural land market. However, some measures for rational use of land,

protection of agricultural land, prevention of land abandonment and land improvement

exist.



Access to credit for small farms is very small. The biggest reasons for rejection of

agricultural credits are small income and lack of collateral. Most agricultural households

are in poor financial condition and usually need lending money to start with agricultural

production.



Main obstacles towards development of agricultural land market can be summarized as:

 Land fragmentation;

 Poor land management system;

 Unclear property rights;

 Changes of purpose of agricultural land;

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 Informal rental market;

 Outdated Law on agricultural land;

 Poor economic position of farmers;

 Poor access to credit.





9.7 Serbia


Serbia has well developed agricultural land rental market and moderately developed

sales market. In the last fifteen years the market has become more active. The country

has completed legislative framework, established real estate records system, reduced

the taxes on the transfer of absolute rights, consolidated land parcels and taken some

other important steps towards the development of land market. However, the obstacles

to the development of the effective agricultural land market in Serbia are insufficiently

effective implementation of laws in practice, inadequate tax policy, data on unique real

estate records are not updated, high fees for certification of purchase and rent

agreements with public notaries, fragmentation of property, insufficient interest of

farmers for land consolidation, expensive and long-lasting land consolidation procedure

and unfinished restitution procedure.



The agricultural credit market has also improved and the portfolio of agricultural loans

is steadily growing. However, possibility of small farmers to obtain credit is smaller than

of big farmers or rural companies. Main reasons are lack of own funds, inadequate

creditworthiness of small farm households for the purchase of agricultural land and lack

of collateral.



Main obstacles towards development of agricultural land market can be summarized as:

 Land fragmentation;

 Ineffective implementation of laws;

 Land degradation;

 Speculative buying of agricultural land;

 Unfinished restitution process;

 Social insecurity of farmers;

 Poor access to credit for small farms.



9.8 Cross-country conclusions and policy recommendations



Based on the findings for individual WB countries/territories we can conclude that they

face many problems that impede the development of functional agricultural land market,

which is in some cases still highly unregulated. Main conclusions, recognized in this

study are common among all countries/territories are (not ordered by significance or

frequency of answers):

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

 Lack of reliable and accurate data and statistics;

 Small average size of agricultural holdings;

 Unfinished restitution process;

 Unclear property rights;

 Land fragmentation which is in some cases extreme;

 No sale of state-owned land;

 Weak agricultural land sales market and better developed rental market;

 Lack of access to credit for rural population;

 Non-existing or non-functional legislative framework

 Poor economic position and social insecurity of small farmers;

 Conversion of agricultural land to construction sites and land abandonment;

 Complex administrative procedures.



Lack of reliable and accurate data presents a big issue in WB countries/territories. Some

reported the absence of accurate and reliable information on agricultural land (Kosovo,

Albania, the Former Yugoslav Republic of Macedonia, Republic of Srpska), activity of the

land market (Kosovo, Republic of Srpska), sale and rental prices (the Former Yugoslav

Republic of Macedonia) or farm number and size structure (Federation of Bosnia and

Herzegovina).



In all of the analyzed countries/territories, register of agricultural land and cadaster are

not regulary updated, unreliable, uncoordinated and unharmonized, which consequently

causes incomplete data on land ownership and unclear property rights. This impedes

subsidization of farmers and sale of the land, as well as the use of agricultural land as

collateral for crediting purposes.



In all Western Balkan countries, one of the biggest development disadvantages are

unfavourable size of agricultural holdings, and the fragmented and dispersed land

ownership. The main goal of the consolidation measures is to improve the land structure

of agricultural holdings and to enable efficient and rational use of agricultural land. Land

consolidation contributes to the increase the income of the consolidated parcels,

increase the rent rates and market price of the consolidated land and reduce production

resources.



General policy recommendations for all WB countries/territories are:

 Improvement of knowledge transfer and information actions regarding

agricultural land market and available agricultural land;

 Completion the restitution and denationalisation process of agricultural land and

regular updating of land register and cadastre. This includes regularisation of all

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Bedrač et al.: Land Market Development and Small Farms’ Access to Land in the Pre-Accession Countries

land titles and ownership rights and establishment of efficient land records and

monitoring system;

 Establishment of legislative framework that will prevent further fragmentation of

agricultural land through the institute of protected farms;

 Increase the volume of lending in agriculture with establishment of special credit

lines for small agricultural holdings and simplify application procedures;

 Setting-up of producer groups and organizations of small agricultural holdings,

which would unite easier to obtain funds and provide the necessary collateral for

agricultural loans;

 All Western Balkan countries should introduce land use fee (like in the Federation

of Bosnia and Herzegovina) in order to prevent the abandonment of agricultural

production and ensure the cultivation of agricultural land. The funds that would

be collected by the land use fee would be used for land consolidation projects;

 Increasing the share of young farmers can contribute to the faster introduction

of new technological knowledge and innovation in rural areas. The policy should

enable them the favourable rent of state owned land;

 Define development-capable prospective farms, which in the future will be the

drivers of rural development in Western Balkan countries;

 It is necessary to equalize the inheritance rights of all beneficiaries, regardless

of age and gender (case in Albania) ;

 Adopt inheritance regulations and law that will prevent further fragmentation of

agricultural land;

 Support the land consolidation with investments in rural roads, irrigation and

drainage projects and other relevant infrastructure;

 Establish public financial fund, which will be designed for a more sustainable

achievement of development goals in rural development. This fund will co-finance

the projects in the field of rural development and support for projects in primary

agricultural production as well as projects of processing, marketing and land

consolidation activities.



Based on respondents’ answers we may conclude that surveyed WB countries/territories

still have a long way ahead towards establishing functional agricultural land market.

Land market ineffectiveness impedes the growth of farm size and modernization of

agricultural sector. Among all the surveyed countries/territories, Serbia has the most

developed land market with the largest average farm size, strongest land market activity

and many implemented governmental measures that address this issue.





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