Authors: Eitra Myo & May Myat Thu
Urbanisation has taken place in Myanmar at a high pace after the country had previously lagged behind its neighbouring countries for decades. Positive political reforms which are targeted to welcome and attract many foreign investments have led to economic and technological developments in Myanmar. This has further led to urbanisation in the main cities of Myanmar which are engaging in trade. Correspondingly, the demand for urban infrastructure in big cities such as Yangon and Mandalay has increased rapidly and brought about a boom in the number of apartments and condominiums being bought and sold.
Apartments Vs Condominiums
Due to the affordability of land, people choose to live in either apartments or condominiums in urban areas. In comparison between apartments and condominiums, the condominium market seems to be getting more interest from the public because of condominiums’ better facilities and its creditable status, as compared to apartments. It is because, if the Condominium Law is enforced, condominiums will be registered under the said law, and owners will have the right to co-own the land, hence raising the creditable status of condominiums in general. As a result, registered condominiums can be used as legal collateral in the obtaining of loans. Further, condominium developers usually offer consumers the option of paying the sale price of their respective condominiums in instalments, which is an attractive payment structure to the middle and upper class buyers.
Moreover, single households, families which do not have children, or expatriates working in Myanmar tend to prefer compact accommodation with affordable prices and better facilities than apartments. Therefore, mini-condominiums are becoming popular in the cities of Yangon and Mandalay.
Introducing Condominium Law
The Condominium Law was enacted in 2016 in order to govern the rapidly growing real estate market. It has taken some years to develop and enforce, and is becoming more active in September 2018 with the establishment of Registration Offices in the main cities. The role of Registration Offices is to process and monitor the registration of collective land and condominiums.
The highlights of the Condominium Law are as stated below.
The Condominium Law grants some level of consumer protection to buyers, so as to raise their confidence in purchasing condominiums. For example, a developer shall deposit 20% of the total project costs in a separate bank account before receiving the project permit and this funding will be used only for the project.
Moreover, the law states that developers shall commence the pre-sale of their units only after at least 30% of the foundation work has been completed. These requirements will provide comfort to buyers/investors that the project is likely to be financially secured.
Land Ownership as Collective Land
Normally, both condominium- and apartment-owners do not hold the title to the land on which their units sit, but they will hold the title to their respective units. According to the Condominium Law, developers shall register the land at the Registration Office as “collective land”, and the buyers will have the right to own the land as collective owners. This provision will not create complications for the registration of freehold lands and grant lands as they are privately owned lands. However, for the case of state-owned lands, it is still unclear whether they are eligible for conversion into ‘collective land’. With reference to Rules 20 and 21 of the Condominium Law, state-owned land may be converted into collective land if the project complies with the requirements of Chapter 4 of the Condominium Law. In Chapter 4, it is stated that the land may be converted, if the respective government bodies have given their permission. Therefore, the state-owned land cases might well be greatly dependent on the decision by the relevant government bodies.
With the introduction of the Condominium Law, foreigners can now purchase up to 40% of the saleable floor areas of the condominium building, but their ownership is limited to ‘the tenure of the condominium’. This is an ambiguous statement as foreign owners are given the same rights with the local owners as per Rule 46 of the Condominium Law. Our view is that the Rules regarding foreign ownership need to be further clarified in relation to the rights and obligations of owners who are foreigners, and the type of foreigners who are eligible to purchase the units.
The Condominium Law sets the basic framework regarding buyer protection and the legal requirements for condominium projects, despite it having Rules which are admittedly unclear and which should be further clarified. Nevertheless, the introduction of the Condominium Law can be said to be a good start for the control of the one of the biggest growing markets in Myanmar.
If you wish to know more general or legal information about investing/setting up company in Myanmar, please do not hesitate to contact us.
Vanessa Ng, COO
+65 6535 8100
Eitra Myo, Legal Manager
May Myat Thu, Corporate Affairs Executive
Written by: Eitra Myo & May Myat Thu