Few ‘condos’ qualify under new law, say experts

The new condominium law – which will grant international buyers access to Myanmar’s real estate market for the first time – has been widely welcomed, but experts say just a handful of properties are initially likely to be eligible.

After years of debate between the two houses of parliament, the law was passed on January 22, allowing foreigners to buy up to 40 percent of condominium units on the sixth floor and above, which real estate agents had been hoping would jump-start the listless market.

However, many of the new residential high-rises built in Yangon over the past few years will not meet the conditions set out in the law, experts said.

Some of the most high-profile residential projects in Yangon are built by foreign investors on government land, under build-operate-transfer terms. Under the new law, such public-private joint ventures may not be considered as condominiums, said U Than Oo, deputy chair of the Myanmar Real Estate Services Association (MRESA).

“Under BOT terms, a developer leases the land from the government. As the company does not own the land, residents cannot own it either. They live within the terms of the agreement with the government,” he said.

“This does not suit the new condominium law, which only covers big projects built on privately owned land. Many buildings on government land are being sold as condominiums. It will take some time to fix these issues,” said U Than Oo, adding that any law is better than no law.

Others confirmed that a number of apartment blocks under construction or already built will not qualify under the new law, despite being marketed as condominiums.

U Ko Ko Htwe, deputy chair of the Myanmar Construction Entrepreneurs Association, said the law will not cover apartments or other types of housing. “Really there are only up to 10 condominiums [in Myanmar] that actually meet the conditions of the law,” he said last weekend, at a seminar held by iMyanmarHouse.com on the construction and real estate industry.

However, U Saw Hla Htun, secretary of the Pyithu Hluttaw Bill Committee, pointed out that under the 1987 Transfer of Immovable Property Restriction Act, the Ministry of Construction has authority to sell real estate to foreigners.

“According to the 1987 law, the ministry can sell to foreign companies and embassy staff if they want or need,” he told The Myanmar Times.

The law, which prohibits selling immovable property to foreigners or foreign-owned companies, also states that “the relevant ministry may allow exemptions … to a foreign government for the use of its diplomatic mission … or to any other organisations or individuals.”

As of January 22, all private companies must obtain a permit from the Ministry of Construction, as well as the local authorities and MIC to confirm their projects are classified as condominiums by law and can be sold to foreign buyers.

Meanwhile, industry players are already nervous about the influx of international capital. Daw Moh Moh Aung, general secretary of MRESA, said if the market is opened to everybody, it could result in problems.

“It’s good that foreigners can own condominiums, but what kind of foreigners – people who have lived in Myanmar for some years, or everyone? The point is not clear in the new law and could cause disorder at local businesses,” she said. In Singapore, she added, only foreigners who are permanent residents can buy real estate, adding, “Myanmar’s condominium law should be like that.”

Myanmar only started granting permanent residency a year ago. Foreign professionals, technicians, investors, former Myanmar citizens and spouses of citizens are eligible.

Daw Moh Moh Aung also noted that under the new law, foreigners will be required to pay a 5 percent sales tax. “According to our new taxation law [for the coming year], locals must pay between 15pc and 30pc sales tax. This may mean we have to pay more than foreigners,” she said.

Under the new law, an apartment block must be built on 20,000 feet (0.5 acres) of land to qualify as a condominium. Daw Moh Moh Aung also challenged this, saying it would be bad for traffic.

“The draft law said condominiums would have to be built on at least an acre of land, but this size has been halved. This is not in keeping with Yangon’s traffic situation, because it will not leave much room for car parking.”

With its under-developed road network, decrepit public transport and lack of public parking space, Yangon is becoming increasingly congested.

U Saw Hla Htun said the decision was made because there are not many sites as large as 1 acre in Yangon. “Recently, demand for condos has been high. We thought it might be difficult for developers to secure 1 acre of land, so we lowered the requirement to 0.5 acres.”

Real estate agents said they remain hopeful the new law will help the market to recover. “Currently we are facing very low demand for condominiums among local buyers and foreign tenants,” said U Khin Maung Aye of Shwe Kan Myae real estate agency. “Now the law is here, I think demand will recover, not only for condos but for real estate in general.”

 

Source: Myanmar Times

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