made.<sup>17</sup> A remaining data challenge relates to transactions of apartments that tend to lack cadastral numbers for underlying land. Resolving it requires acceleration of ongoing efforts to fully implement an address register that is interoperable with the urban cadaster through an API and an expansion of existing data reporting requirements and exchange protocols for land parcels to include real estate.

While accurate property valuation will be invaluable to guide activities by the private sector, translating it into higher local revenue requires that market values change the tax base taxes on land or real estate from NMV or floor area, respectively, to value. In this context, exemptions and caps on local governments’ ability to adjust taxes may also need to be reviewed, ideally based on evidence of their impact on revenue.<sup>18</sup>

# **4. Implementing a mass valuation model for commercial agricultural land in Ukraine**

This section presents the valuation model, the public data used to estimate it, and the prices predicted by the model. Comparing predicted prices to normative values for 1.2 million of the 7.2 million parcels for which such values are available shows that, while mean estimated prices are 25% above the normative monetary value, a market-based valuation increases horizontal equity with limited increases in the country’s East and South but land values that are more than 30% above the NMV in the Center, North, and West.

# **4.1 Regression model and variable construction**

To provide a market-based valuation for agricultural land for commercial farming, we focus on some 160,000 transactions completed between June 2021 and July 2024 to estimate a hedonic valuation model (Rosen 1974). The underlying assumption is that transacted parcels’ prices are the result of an equilibrium between demand and supply functions that are differentiable in land characteristics relevant to the seller and buyer respectively (Palmquist 1989). If land markets are homogenous (Huang _et al._ 2006), knowledge of the price and characteristics of a transacted parcel then allows to recover the marginal contribution of each characteristic (Palmquist 2005). Applying these regression coefficients to parcels not transacted then provides the basis for predicting the prices of all parcels.

Formally, the hedonic model to be estimates takes the form i i i i , (1) ii where i is the sale price of a parcel log PP in region = ααZZ + ββXX in constant 2024 USD per ha, + aa + ee i is a vector of parcelspecific characteristics including parcel size, land use at the time of transfer (crops, forest, built up, grass PP ii jj XX

> 17 Law No. 340-IX from December 5, 2019, "On Amendments to Certain Legislative Acts of Ukraine Regarding the Counteraction of Raiding" makes price reporting mandatory. Subsequent adjustments to the registry’s software made this mandatory in the registration process with land price data now transmitted automatically to the State Land Cadastre (SLC) through an automated information exchange protocol.

> 18 The tax -free allowance is 60 m2 for apartments, 120 m2 for residential buildings, and 180 m2 for other buildings in addition to a luxury tax of UAH 25,000/a for apartments and houses above 200 and 500 m<sup>2,</sup> respectively. Local governments are allowed to impose land taxes of up to 1 percent of NMV per year on land and 1.5 minimum wages. Families with three or more children, disabled individuals, retirees, and war veterans are exempt from land tax irrespective of income or wealth.

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