A major factor constraining the development of the real estate sector is the lack of a mature mortgage market. Ambiguities on regulations related to immovable property rights, and incomplete or incorrect ownership records, are two of the main reasons why a mortgage culture has not yet developed in Myanmar.
After promising growth in the first few years after political and economic reforms began in 2011, the real estate sector has struggled to maintain pace in recent years. Legislative efforts to boost investment in the sector and stimulate growth in the mortgage market include the 2016 Condominium Law and the subsequent enabling rules enacted in December 2017.
Although the rules were initially welcomed as a potential boost to the real estate market, there remains a lack of clarity regarding their implementation. Key aspects of the new rules include a definition of what constitutes a condominium – a building that is at least six stories high, built on collectively owned land and registered under the Condominium Law. It also includes a stipulation that allows foreign investors to buy up to 40% of the units in a condominium block, as well as the right to transfer, lease and mortgage their ownership rights.
One aspect of the new rules that has been billed as offering the most potential for the growth of mortgages is the introduction of unit registration certificates (URCs), which provide evidence of the ownership of individual apartments, similar to what is known as strata titles in other countries. As stipulated in the rules, the person whose name appears on the certificate will be the legal owner of the condo unit and can use the URC as security for a bank loan. However, lingering confusion over the implementation of the rules meant that they have not had a significant impact on the mortgage market in 2018.
Access to capital is a major hindrance for those who want to buy their own property in Myanmar. This has contributed to concerns that some developers could not finish their projects because funding is often reliant on pre-sales.
In part due to a lack of clarity regarding the condominium rules, the surge in property purchases that some had anticipated has not yet occurred, but there are indications that moves by the government to ease foreign ownership of private property may have contributed to increased trust from the country’s lenders, many of which have only traditionally loaned to clients that are well-connected and able to meet onerous collateral requirements. “Bank lending did stop for some time, but trust seems to have been built and many are lending again,” Richard Emerson, managing director of Emerson Real Estate, told OBG. “It is an encouraging step, and one that will hopefully boost the sector.”
Private banks are gradually diversifying their housing mortgage programmes within the confines of the 13% interest rate cap imposed by the Central Bank of Myanmar. In September 2018 Yoma Bank announced that it will offer home loans with 25-year repayment plans and 30% down payment for units at either of the three projects under development by its sister company, Yoma Land. Another of the country’s lenders, AYA Bank, announced in March 2018 that it would provide 15-year loans for 4000 residences, also at an annual interest rate of 13%, with a 30% down payment. The loans are available to any Myanmar citizen over 20 years of age with a “stable and reasonable income”.
Meanwhile, the licensing of the country’s first credit bureau in May 2018 should make it easier for financial institutions to conduct risk assessments of home loan applications and lessen the need for onerous collateral commitments (see Banking chapter). “The Myanmar Credit Bureau is definitely going to trigger activity in the loan and mortgage markets, bringing liquidity to the construction sector,” U Khin Maung Aye, chairman of Lat War Group, told OBG. “However, we do not expect much impact at the high-end of the real estate market, where many buyers are already able to access credit.”
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