With the general elections scheduled for this weekend the future of country’s real estate industry is at stake
Myanmar is regarded as one of the ‘final frontiers’ in Southeast Asian real estate, being tipped as a hot investment prospect despite the absence of foreign ownership policies.
After five decades of direct and indirect military rule, the country began the path to democratic reform just after the turn of the millennium. A new capital was established in Nay Pyi Taw, a new constitution was approved in 2008 and a general election was held in 2010. The current government is nominally a civilian one, although it is backed by the military.
The next election – scheduled on Sunday, 8 November – is sure to capture the attention of the world as the ruling Union Solidarity and Development Party face off against the National League for Democracy, led by national figurehead Aung San Suu Kyi.
“The election is highly anticipated by citizens of Myanmar and foreign investors alike,” says Balaji Ramaswami, managing director of property portal House.com.mm. “The last poll really helped open up the country’s economy so it will be interesting to see the impact of this one.”
The approved amount of annual foreign investment in Myanmar real estate has increased steadily from USD440 million in 2013-14 to USD780.7 million in the current fiscal year, based on data from the Directorate of Investment and Company Administration (DICA).
“The economy needs a government that can focus on further development of the country, infrastructure being a main driver,” continues Ramaswami. “It requires a leader who will be conducive to business relationships with other nation. This would assist the growth of the nation and its economy.”
There has been a huge wave of global business interest in Myanmar and a number of major foreign companies have started local operations. Far-reaching reforms will, however, be required to encourage and facilitate responsible investment in the country, according to experts.
“The market is much more restricted than elsewhere in Southeast Asia,” says Richard Emerson, country manager of Savills Myanmar. “There’s a lack of any form of foreign ownership, a lack of mortgage finance, and a basic lack of affordability for most citizens.
“Also, the residential development market is largely supported by investment purchasers seeking to take advantage of the expat rental market, rather than owner occupiers. “
Based on existing laws, foreigners are not permitted to purchase real estate in Myanmar. They are allowed to lease the land for a maximum of 70 years by undertaking a development project, subject to the government’s registration and approvals process. “Whilst some foreigners may have secured condominium units through the use of a local nominee partner, this is not advisable,” Emerson cautioned.
One of the most significant changes likely to be heralded by the November election is a proposed Condominium Law, which will allow foreign ownership of up to 40 percent for certain types of condominium units. Local market experts, including Nay Min Thu, managing director of iMyanmarHouse.com, believe that the law is likely to be enacted post-election and will set a standard for the condominium segment.
As it stands, Myanmar’s residential market is essentially driven by local investors and relies heavily on demand for rental accommodation from foreigners, especially in the former capital Yangon. Major business operations are still based in Yangon, making it the strongest domestic property market.
Mandalay, the second largest city in Myanmar after Yangon, is seen as another market with major potential. Its location makes it a useful gateway to the Chinese market and many investors from that country have already moved in. Other secondary cities may have to wait until the next administration assumes office and introduces further positive changes in the real estate sector.
“One of the primary concerns in Myanmar is stability and certainty in the context of making large and long-term investments,” according to the Australia-Myanmar Chamber of Commerce (A-MCC), a Yangon-based business organisation pushing for more legal and infrastructure reforms to encourage and facilitate responsible investment in the country.
The Myanmar government recently stepped in to cancel five major property projects due to fears that they may damage the landmark Shwedagon Pagoda. This kind of unexpected decision, says the A-MCC, is indicative of the challenges faced in the country. “It is expected that there will be a rush by businesses to finalise deals and obtain approvals from the government prior to the election,” a spokesman for the group continued.
Unsurprisingly, activity in the market is currently slow as the elections approach. “People like a stable environment in order to make long-term investments,” adds Emerson. “The current election is of particular importance. Therefore, it is only to be expected that residential buyers and investors are taking a ‘wait-and-see’ approach.”
Investors are united in hoping that the election passes peacefully, and that the country continues to improve upon the economic and social progress made to date.
“Everyone wants a sustainable development environment for the future,” adds Emerson. “Together with a well-balanced real estate market.”
Only time will tell if the polls deliver such an outcome.