HomeMMBIZ NewsMyanmar’s Problem Child – The Real Estate Market

Myanmar’s Problem Child – The Real Estate Market

When people discuss the current situation of Myanmar, you will very likely come across the topic of skyrocketing prices in the real estate market and hear of prices being higher than in many European or American cities.

Current and future trends foresee the market to be overwhelmed and struggling to meet the high demand for short to medium term contracts. Not only foreigners seeking to live here and find accommodation go through a demanding process, also foreign companies might find themselves struggling to find a solution of where they should locate themselves.

“Location, Location, Location” are three key ingredients in making your business a success and sustainable – moving each time your contract runs out is demanding and your costumers or vendors might not want to follow you every single time.

Without a doubt, foreign investors coming to Myanmar and citizens alike are in need of suitable and affordable real estate. Landowners on the other hand seek high-quality long-term tenants and try to provide suitable appointed commercial and residential spaces.

As a result, the real estate market needs to improve transparency and openness to turn what can sometimes be a risky and frustrating process on all sides, into a smooth and efficient one. Factoring this in, especially small and medium size enterprises (SMEs) are cautious to commence business in Myanmar, although they are highly needed for a stable economy.

Generally, under the constitution, land in Myanmar is owned by the state. Land administration is assigned to various government departments who will supervise the use and extraction of it. Under the Land Acquisition Act 1894 (LAA), the government may acquire or temporarily occupy land for public purposes. In certain cases the President of the union is able to grant a company the same power for public purposes, which the LAA would compensate to the original landholder.

Before 30 September 2011, foreigners and foreign companies were not allowed to buy land in Myanmar or lease land for a term exceeding one year unless specifically permitted by the government according to the Transfer of Immovable Property Restriction Act of 1987. This act prohibits the transfer of immovable property between citizens and foreigners. Therefore, foreigners are prevented from accepting mortgages as security.

Additionally, it does not apply to companies or organizations in contract with the state. However, there are exceptions for diplomatic missions and transfers for the benefit of the State. A company approved under the Foreign Investment Law (FIL) could request a long-term right of lease from the government.

Even as foreigners are still not allowed to invest in land, the restrictions placed upon them have been eased: Foreigners can now lease not only from the state but from private individuals as well. Lease periods for companies approved by the Myanmar Investment Commission (MIC) are possible up to 50 years, depending on the type of operations of the company, be it industrial, agricultural or commercial. After this period has expired, the MIC may authorise an extension of further 10 years, renewable for another 10 years.

While a foreign investor may not own land, land use rights can be obtained in two ways. On the one hand either by obtaining land use rights under a lease, from either the government or private citizens, approved by the government or by receiving land use rights which are contributed to a joint venture by a government agency.

However, regarding the condominium official draft law foreigners should be eligible to own apartments on the sixth floor or above of condominiums. The draft also stipulates that foreigners will have the right to buy up to a maximum of 40 percent of apartments above the sixth floor in condominium apartments.

The proposed draft of the condominium law makes no building code or construction standards mandatory. As such, without a building code, the quality of future constructions for these buildings would be steered solely by market demand.

Nevertheless, according to Yangon City Development Committee engineering deputy director U Nay Win nearly all of Yangon’s recently constructed “condominiums” may not qualify as condominiums under the draft Condominium Law. Although, in public language, one usually describe a high rise building with apartments and elevator as condominium, legal terms are very clear on definitions.

While plenty of construction is ongoing, with premium real estate at competitive rates, in next half decade, Myanmar will further have to invest in numerous housing options to cater the high demand and remove some of the barriers of land leasing to attract further Foreign Direct Investment into the “Golden Land.”

Christoph Pellech is a business consultant at Strohal Legal Group (SLG), a law firm offering personalised services specialising in international and cross border business. In Myanmar, SLG provides services under the name U Min Sein & Strohal Associates Law Firm.

The views and opinions expressed here are the author’s own and do not necessarily reflect Myanmar Business Today’s editorial opinion.

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