Hopes are high that a recent move to clarify regulations governing the sale and development of condominiums in Myanmar will boost their demand. The Condominium Rules, published by the Ministry of Construction (MoC) on December 15, 2017 ease restrictions on foreign ownership, clarify aspects of the law and provide greater safeguards for buyers. They are expected to boost sales activity and drain off some excess supply, particularly in the mid to high end of the residential market. They may also serve to encourage new projects in Yangon, where the majority of foreign property investment is focused.
Under the new rules, foreign buyers can now acquire up to 40% of the total floor area of a condominium building, rather than only 40% of units located above the sixth floor of a complex, as was previously stipulated. The amendment not only greatly increases the area that can be held by foreigners, but also allows prospective buyers to take up residence in lower-rise buildings. However, in practice, the administrative procedures are not yet in place to enable foreigners to purchase condo units. The law requires the buyer to prove that the land on which the condo block is built is registered as collectively owned land, while also proving the separate registration of the unit itself. The bodies that are to facilitate these processes – Regional and State Management Committees and Condominium Registration Offices – are expected to be established by the MoC in the second half of 2018. Only when these are up and running will foreigners be able to legally purchase a condominium unit.
Foreign investors and entities are also able to become joint developers of a condominium under the law, although several requirements must first be met, including obtaining a permit or endorsement from the Myanmar Investment Commission, gaining approval from the relevant Management Committee and being in possession of a formal agreement with the developer.
The new rules provide greater safeguards for property buyers, as well. The regulations place a number of restrictions on developers by codifying terms for off-plan sales. Central to these is a requirement that developers can only pre-sell units after 30% of the foundation has been completed, a measure aimed at providing increased protection to unit purchasers, while also allowing builders to generate the cash flow needed to finance ongoing projects. Further safeguards include a requirement that 20% of the total investment cost be deposited by the developer before titles for units are issued. Additionally, the regulations satisfy an uncertainty in the original legislation by stipulating that existing buildings, as well as those currently under development, are covered by the rules.
While the condominium segment is expecting an increase in demand thanks to the new regulations, the broader market should also be buoyed by rising calls for units in the mid-range bracket.
According to a recent report by Colliers International, the turnover of lower-tier apartments is likely to improve in 2018 on the back of increased buyer interest in basic but modern developments that are smaller in size and reasonably priced. This segment of the market is currently underserved due to a limited supply of studio and one-bedroom units, providing opportunities for developers to expand into an area that offers strong and rising consumer interest.
Demand for smaller and less costly units reflects the needs of much of the domestic market, according to Melvyn Pun, CEO of Yoma Strategic Holdings. “Myanmar is a challenging market and developers need to understand consumers,” Pun told OBG. “Three-quarters of demand is in the low-end and affordable housing segments. Market development must be driven by end users’ needs.” According to Pun, the number of lower-tier residential properties is expected to increase in the coming years in tandem with the likely growing availability of mortgages, which are still underdeveloped in Myanmar. This, coupled with the rollout of the Condominium Rules, should support long-term growth.
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