Relevant Legal Framework for Real Estate and Property Development

in Myanmar

By: Kelvin Chia Yangon Ltd 26 July 2013

Land In Myanmar

Area: Largest and least explored land mass on mainland SEA Total: 678,500 sq. km. Land: 657,740 sq. km. (about

50% mountains and forests) Water: 20,760 sq. km.

Strategically located land borders: Total: 5,876 km. Bangladesh: 193 km.; China: 2,185 km.; India: 1,463 km.; Laos: 235 km.; Thailand: 1,800 km. Total Coastline: 2,832 sq. km.

A N D A M A N S E A

B A Y O F B A N G L

KACHIN STATE

CHIN STATE

SHAN STATE

KAYA STATE

K A Y I N S T A T E

M O N S T A T

SAGAING DIV ISION

MAGWAY DIVISION

BAGO DIVISION

YANGON DIVISION

M A N D A L A Y

D I V I S I

O N

A Y E Y A R W A D Y D I V I S I O N

T A N I N T H A R Y I

D I V I S I O N

CHINA

LAOS

THAILAND

INDIA

BANGLADESH

Contents

Overview of Land Laws/Key Features

Investing in Land in Myanmar

Commercial and Residential properties / Hotels

Dealings in Real Property

Overview of Land Laws The Legal Landscape

Features of Land

Restricted to Specific Uses

Commercial/ Industrial/ Residential

Agriculture / Livestock Breeding / Mining / Others

Rights and Title

URBAN - Freehold/Grant Land NON-URBAN - Rights to

Cultivate/Utilize

Constitution

Laws Notifications Policies

Land Administration

Administrators

Allocated or CFW Land

Proposed Use Location Impact on the

State and Resources

Source

Farmland/Cultivable land, fallow land and

waste land (CFW)

Government ministries and state owned organizations

Myanmar entities and citizens

Investing in Land in Myanmar

Register Company/ Branch office with the CRO

Applying for a Permit to Trade With the CRO

(Business License)

Establishing a Company

Establishing

a Branch Office

Myanmar

Investment Commission

Approval

Regulated by the Foreign Investment Law

Regulated by the Myanmar Companies Act Executive

Committee

Cabinet Committee

Establishing an Entity

Investing under the FIL

MIC permit is always required for a land related project

Land must be identified for MIC approval

Land lease contract has to be submitted

Land required must not be excessive to the needs

Land can be leased or can be contributed as capital

Commercial/Residential Developments

Commercial Buildings:Project can be 100% foreign investment in BOT system; possible through JV with local partner

Residential Buildings: only through JV with local partner; land to be contributed or leased

Lease period can be 50 +10 + 10 years

Exit through transfer of the lease and building

Limitations on the sale/long term leases of individual units

Draft Condominium Law

Ministry of Construction, YCDC/DHSHD or the Regional Government

Hotels

Ministry of Hotels and Tourism

Project may be wholly foreign owned, joint venture, or BOT

Lease period may be 50 +10 + 10 years

Management contracts are permissible by service companies

Commercial Tax of 5% payable on sale receipts

Foreign Investors and Property

No Foreign Ownership

Limited Rights to Lease / Use

Rights Granted under the Foreign Investment Law

(with an MIC Permit)

Foreign Investors and Property

• Transfer of Immovable Property Restriction Law (TIPRL)

• No dealings of land where a foreign party is involved

General Restriction

• Leases of less than 1 year

• Does not apply to “companies or organizations formed under common interest with the State”

Exceptions to the Restriction

• May lease land where necessary for the investor’s business

• Period of 50+10+10 Years; Longer period for those who invest in a less developed and inaccessible location

Foreign Investment Law (2012)

Investing in Land under the FIL

Application to be submitted and approved by the MIC on a project-basis

Investment in land may be 100% foreign owned – it is sector driven

Certain sectors reserved to locals

Certain sectors are subjected to compulsory joint ventures

Certain sectors are subjected to special conditions

Land rights under the FIL

How?

•Project and Land has been identified ----- Negotiate Lease

From whom?

•Government

•Private companies/ individuals

Duration

•Currently 50+10+10

•Longerperiod to those who invest in a less developed location where difficult to access, for the sake of countrywide development.

Payment

•Rental depends on whether the lessor is the Government or private entity

•Government Approval

•Premium for Government Leases

Standard Terms of a Lease

Initial Term 50 years

Renewal Term

Two consecutive terms of 10 years, May vary based on the types and volume of the

investment

Rental

Government linked - Determined by the MIC and approved by the Union Government

Ministry must charge a land premium Private entities – Market rental to be negotiated

and approved by MIC

Right of transfer

Any sub-lease, mortgage, transfer of share, transfer of business, relating to the land can only be effected with the permission of the MIC.

Such transfer can only be made to a person for the remaining contractual term and only with the approval of the MIC.

Other requirements

Purpose of land use must be clearly specified in the lease.

Standard Terms: Limitations

Activities that are not related to the business as set out in the investment proposal to the MIC

Natural resources in the land cannot be exploited.

If natural resources or antiques are discovered on site, the investor may only continue to use the site with the permission of the MIC. If no permission is granted, the investor will be relocated to another location.

Changes to natural surface, appearance, or altitude of the land can only be undertaken with the approval of the land owner and the chief of the region.

Standard Terms: Termination

Failure of the investor to pay rent

Violation of laws on the part of the investor

If the investor is blacklisted

If the MIC decides that the activities pollute the environment, air and water, or if the residents object due to noise or cultural disturbances

For breach of the terms of the contract

If the investor decides to terminate the business (6 months notice must be provided to the MIC and the full rental for the term as set out in the contract must be paid. The land should be transferred to the owner within a week of the company’s liquidation)

Dealing with Real Property The Details

Acquisition Conversion

Land Acquisition Act – Section 78 of the Farmland Law

Government / Private Acquisition

Responsibility for Acquisition

Public Purpose

Compensation – Farmland Law

Agricultural land is not to be used for other purposes.

Land Nationalization Act

La Na 39

Section 78 of the Farmland Law

New Procedures

Mortgages/Disposal

Mortgages Created under the Transfer of Property Act

Foreigners restricted under TIPRL

Permitted with the approval of the MIC

Banking sector issues

Disposal Restricted under TIPRL

Permitted with the approval of the MIC

Income and Capital Gains Tax

csg@kcyangon.com Unit 1509, 15th Floor Sakura Tower,

339 Bogyoke Aung San Road, Kyauktada Township,

Cheah Swee Gim Director, Kelvin Chia Yangon Ltd.