Real Estate Comparative Guide -

1 Legal framework

1.1 What legislation governs real estate in your jurisdiction?

There is no specific legislation on real estate in Myanmar. The relevant framework is set out in several statutes, as follows:

the Myanmar Constitution 2008, which grants the state the ultimate right to ownership of all land in Myanmar;
the Transfer of Property Act 1882, which governs the legal mechanism for the transfer of immovable property. In particular, it sets out rules on the transfer, sale, mortgage and lease, gift or exchange of immovable property;
the Transfer of Immovable Property Restriction Act 1987 (TIPRA), which restricts the transfer of immovable property to foreigners or foreign-owned companies. It also limits the term lease of land to foreigners to one year;
the Special Economic Zones (SEZ) Law 2012, which allows a foreign investor in an SEZ to lease land for 50 years, with a right to renew for another 25 years;
the Myanmar Investment Law 2016 (MIL), which allows a foreign investor to enter into long-term land leases for up to 50 years with two 10-year extensions if it obtains a permit or an endorsement from the Myanmar Investment Commission (MIC);
the Condominium Law 2016, which allows foreigners to purchase and own units not exceeding 40% of the private space;
the Land Acquisition, Resettlement and Rehabilitation Law 2019, which provides a mechanism for the state and companies to acquire land compulsorily where necessary for a public purpose upon providing fair and adequate compensation;
the Farmland Law 2012, which provides for the usage and registration of land that is classified as farmland. It provides for a system of land conversion of farmland into commercial/other uses;
the Vacant, Fallow and Virgin Lands Management Law 2012, which regulates the use of land that has never been tenanted (virgin land) or land that was previously tenanted, but has since been abandoned (vacant and fallow land);
the Registration Law 2018; and
the Stamp Duty Act 1899.

1.2 What special regimes apply to different types of real estate?

As a general rule, the TIPRA restricts foreigners from owning real property in Myanmar. Further, leases of land are permitted only for a period of up to one year for foreigners. The only exceptions are the special regimes under the MIL, the SEZ Law and the Condominium Law.

The SEZ Law allows a foreign investor in an SEZ to lease or use land for 50 years, with a right to renew for another 25 years. The MIL allows a foreign investor to enter into long-term land leases for up to 50 years, with two 10-year extensions, if it obtains a permit or an endorsement from the MIC. The Condominium Law allows foreigners to purchase and own units not exceeding 40% of the private space in condominiums.

2 Ownership

2.1 What types of ownership rights exist in your jurisdiction?

The ownership rights that exist in Myanmar include:

the right of possession;
the right of control;
the right of exclusion;
the right to transfer;
the right to derive income; and
the right of disposition.

2.2 What ownership structures are commonly used in your jurisdiction?

Ownership of real property in Myanmar is either sole/individual ownership or ownership of real property by a Myanmar company.

Historically, it was not legally possible for a company with any foreign shareholding to own property in Myanmar. Only a Myanmar company (ie, 100% owned by Myanmar citizens) could own real property. However, with the enactment of the Myanmar Companies Law (MCL) in 2018, the definition of a 'Myanmar company' changed to "companies with up to 35% foreign shareholding".

This notwithstanding, the recent practice of the Office of Registration of Deeds (ORD) has not accepted registration of ownership of real property by a company with even a 1% foreign shareholding in light of the restrictions under the Transfer of Immovable Property Restriction Act (TIPRA), which does not allow foreigners to own/acquire real property. Therefore, while legally companies with foreign ownership of up to 35% can own property, the ORD takes a different view and thus, in practice, the ownership of real property may still be restricted to 100% Myanmar-owned companies only.

Various stakeholders are engaging with the Myanmar regulators in an attempt to clarify this regulatory hurdle and it is hoped that the regulators will soon come up with a solution.

2.3 Are there any restrictions on real estate ownership in your jurisdiction?

Yes, in accordance with TIPRA, foreigners (including foreign companies) are not permitted to own real estate in Myanmar. As an exception, the Condominium Law allows foreigners to purchase and own units not exceeding 40% of the private space in condominiums.

2.4 Is ownership of land and buildings constructed thereon legally separable?

Under Myanmar law, 'immovable property' refers to:

land;
benefits from the land;
building and things constructed or situated on the land; and
things installed on those buildings.

Hence, theoretically, land and buildings comprise immovable property and are not legally separable.

However, in practice, almost all land in Myanmar is government-owned and granted land, on which developers have the right to construct. The government typically enters into specific lease agreements with investors to develop particular commercial or residential properties under build-operate-transfer lease agreements, whereby the ownership of the land remains with the government, whereas the investor earns its revenues through leasing out/operating the properties thereon.

Further, condominium ownership is also possible under the Condominium Law, under which condominiums may be built on land registered as 'common land'. The owner of a condominium will have a proprietary interest in the condominium and the right to benefit from common property. The Condominium Law allows foreigners to purchase and own units not exceeding 40% of the private space in condominiums.

2.5 What security interests can attach to real estate? How are they prioritised?

Yes, security in the form of mortgages, charges or assignments can be attached to real estate in Myanmar. Depending on the form of security, they are on equal footing. They may be prioritised through ranking in the respective deed of charge/mortgage or assignment.

Foreign lending: TIPRA restricts foreigners (ie, foreign-owned companies) from owning or acquiring property by way of purchase, gift, pawn, exchange or transfer. Mortgages or charges under Myanmar law are considered to be transfers.

However, Section 228 of the MCL states that the grant of a mortgage or charge, or the exercise of rights by or on behalf of the mortgagee or chargee under such a mortgage or charge to realise the value of any property secured by the mortgage or charge, will not be in breach of TIPRA. Section 229 of the MCL further states that all mortgages and charges will be rendered void if not registered with the Directorate of Investment and Company Administration.

Before the enforcement of the MCL, to mitigate the TIPRA restrictions, foreign lenders used to appoint a local bank as the onshore security trustee (OST), and the security used to be created in the name of the OST on behalf of the foreign lender. However, this concept was never tested in a Myanmar court. This was the most viable means of mitigating these restrictions, given that the Central Bank of Myanmar (CBM) approved the offshore loans where the submitted documents attested to the structure of the security along with the OST arrangement.

Another restriction under TIPRA does not permit the lease of immovable property to foreigners for more than one year. However, as an exception, a Myanmar Investment Commission company can obtain land rights authorisation through which it can lease land for 50 years, with two 10-year extensions. Therefore, for projects which are owned by foreign investors, the Myanmar Investment Law (MIL) itself gives the right to create a mortgage or charge over land rights authorisations in favour of foreign lenders. Further, pursuant to the MCL, a mortgage or charge over the long-term lease can be granted to a foreign lender. Thus, from reading of the MIL together with the compliance requirements under the MCL, security over real property (in the form of a mortgage or charge over the leasehold right) can be granted to foreigners for projects owned by foreign investors. For Myanmar-owned projects in which the Myanmar investor also has title over the land, the security (eg, mortgage or charge) is granted over the project land itself.

Further, for investments within special economic zones (SEZs), the investor (whether a citizen, a foreign national or a joint venture) obtains land use/lease rights from the management committee of the SEZ for 50 years with an option to extend by another 25 years. Section 80(f) of the SEZ Law also gives a right to investors in SEZs to create a mortgage or charge over the land use/lease rights in favour of foreign lenders with approval from the management committee. Therefore, security over the land use or leasehold rights can be granted by the SEZ investor in favour of the foreign lender with approval from the management committee.

Also, there are no restrictions on obtaining offshore loans. Rather, the Foreign Exchange Management Law facilitates the obtaining of offshore loans with the approval of the CBM. While previously, as a general practice, an OST was appointed for enforcement purposes, the MCL does not make it necessary to appoint an OST in order to create a security. However, in practice, the previous workaround for TIPRA restrictions by the appointment of an OST is still being followed. This is because although the MCL mandates the registration of security under Section 228, Section 464 states that the provisions of the MCL relating to foreign companies shall not affect the operation of any provision of TIPRA.

3 Registration

3.1 What body administers the land register in your jurisdiction?

Land records and registers in Myanmar are administered by the Office of Registration of Deeds (ORD).

3.2 Is registration of real estate rights, transactions and encumbrances mandatory? What are the consequences of failure to register?

In accordance with the Registration Law 2018, it is mandatory to register the following types of documents:

Instruments of gift of immovable property;
Non-testamentary instruments which create the sale of immovable property, whether vested or contingent, of the value of one hundred thousand Kyats and upwards; which are created for securing any declaration, assignment, limitation, release and extinguishing of any interest; and any judgment, decree and order passed by the Court on the right/title in connection which such instruments;
Other than the mortgage by deposit of a title deed of the value of one hundred thousand Kyats and upwards, mortgage-deeds and deeds of extinguishing mortgage signed by the mortgagor and certified by minimum two witnesses;
Leases of immovable property on a yearly basis or for any term exceeding one year, and leases for which rents are set out as per the certain year period;
Documents which mortgage, assign or transfer in any means rights of immovable property in part or entirety or interests attached to such property to a trustee;
Deeds of adoption;
Documents and instruments prescribed by the Union Government from time to time.

A failure to register documents that are compulsorily registrable will have the following consequences:

Transfer in any means or lease of immovable property will not be enforceable;
Such a document will not represent as an official document for the authority to adopt; and
Any power, which is related to the property in the document or authorized for the same, will not represent as an official documentary evidence.

3.3 What are the formal and documentary requirements for registration?

The documents presented to the ORD must meet the following requirements:

The documents must be written in Myanmar language;
If the document is not written in Myanmar language, it must be accompanied by the Myanmar version translated and certified by the notary public;
Documents must be signed completely by executants; and
If any interlineation, addition, blank, erasure or alternation is made to the conditions in the document, the persons executing the document must attest with their signature or initials such interlineation, blank, erasure or alternation.

In the case of documents relating to immovable property that are presented for registration, a description of the property – such as its type, structure, size and location – must be sufficiently and clearly provided. If such immovable property is land, two certified land maps and a land history issued by the relevant governmental department and governmental organisation must be attached.

3.4 What is the process for registration?

The registration process is manual: the documents stated in question 3.3 must be physically brought to the ORD for registration.

3.5 Is registered information publicly accessible?

No, registered information is not publicly accessible.

4 Commercial leases

4.1 What types of commercial leases exist in your jurisdiction?

Commercial lease agreements may be either:

gross or full service, in which case the rent includes utilities, maintenance and other costs; or
base or net leases, whereby the lessee pays the lessee/tenant only for the space, with all other costs paid by the lessee/tenant.

4.2 Are the terms of a commercial lease regulated or freely negotiable? What do they typically cover (eg, duration; security deposit; rent; sub-letting; termination)?

Yes, the terms of a commercial lease are freely negotiable based on the understanding of the parties. They typically include issues such as:

duration;
security deposit;
rent;
sub-letting;
termination;
assignment;
governing law; and
dispute resolution forum.

4.3 What are the formal and documentary requirements for conclusion of a commercial lease?

The lease agreement is the formal document representing the relationship between the parties. The lease agreement must be stamped in accordance with the Myanmar Stamp Act and must also be registered at the Office of Registration of Deeds (ORD) within four months of the date of entering into the lease agreement.

4.4 What is the process for concluding a commercial lease?

The lease is perfected upon having in place an executed and stamped lease agreement which is registered with the ORD.

4.5 What are the respective obligations and liabilities of landlord and tenant under a commercial lease, and what are the consequences of any breach?

The rights and liabilities of a landlord are as follows:

The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
the lessor is bound to the lessee's request to put him in possession of the property;
the lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contracts binding on the lessee, he may hold the property during the time limited by the lease without interruption.

The rights and liabilities of a lessee are as follows:

If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;
if by fire, tempest or flood, or violence of an army or of a mob or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void;
if the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;
if the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;
the lessee may, even after the determination of the lease, remove, at any time whilst he is in possession of the property leased but not afterwards, all things which he has attached to the earth provided he leaves the property in the state in which he received it;
when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or, sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;
the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;
the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest;
the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;
the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspecting the condition thereof and give or leave notice of any defect in such condition;
if the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor's rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;
the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell or sell timber, pull down or damage buildings belonging to the lessor, or work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto;
he must not, without the lessor's consent, erect on the property any permanent structure, except for agricultural purposes;
on the determination of the lease, the lessee is bound to put the lessor into possession of the property.

Depending on the lease agreement, the non-breaching party may have the right to terminate the lease agreement and to claim for damages (liquidated or unliquidated) in a Myanmar court for such breach. If the breach is of such a nature that compensation is not sufficient/appropriate, a suit for specific relief may be filed, whereby the court may order the breaching party to specifically perform any part of the contract.

4.6 How are rent variations typically effected throughout the term of the lease?

Any rent variations are effected in accordance with the stipulations in the lease agreement (eg, if the rent variations are attached as a schedule with different amounts of payments on a periodical basis).

4.7 What taxes are levied on rental income?

The rental income from the lease is chargeable to the lessor. For individual lessors, the tax will be 10% of the taxable income from rent. For corporate lessors, the income received will form part of the taxable income subject to 25% corporate income tax (unless covered by an income tax exemption).

In addition, lessors are subject to a 5% commercial tax on rental income received (except for parking space rental). The 5% commercial tax is an indirect tax similar to value-added tax, which can be passed on by the lessor to the lessee.

The lessor is also subject to property tax, which comprises:

general tax (not exceeding 8%);
electricity tax (not exceeding 5%);
water tax (not exceeding 3.25%); and
conservancy tax (not exceeding 8.5%).

The tax rates will be based on the annual value as determined by the relevant region and may vary depending on the location of the property.

Lease agreements are also subject to stamp duty. The rate will depend on the term of the lease, which is:

0.5% of the average annual rent for a lease not exceeding three years; and
2% of the average annual rental for a lease of three years or more.

An additional stamp duty may apply on a premium or advance payment of the lease.

Further, the applicable fees for registration with the ORD is 0.5% of the value of the transaction.

4.8 Can a commercial lease be triple net?

Yes, a commercial lease can be triple net.

4.9 How are landlord and tenant disputes typically resolved?

Landlord and tenant disputes are typically resolved in the Myanmar courts. However, if the lease agreement provides for arbitration, any disputes may also be resolved by arbitration.

4.10 What types of guarantees are market practice and required by landlords to secure the tenant's obligations

Under usual circumstances, a security deposit is typical to secure the tenant's obligations and guarantees are not usual for leases.

5 Real estate transactions

5.1 What form do real estate transactions typically take in your jurisdiction?

Real estate transactions in the form of leases (long term for foreigners) and sale (between Myanmar citizens only) are common in Myanmar.

5.2 Which players are typically involved in a real estate transaction in your jurisdiction?

We have seen mostly Chinese, Singaporean, Japanese and Korean investors in the real estate market.

5.3 Is the seller bound by a duty to disclose? What representations and warranties will it typically make?

In accordance with the Transfer of Property Act, the seller is bound to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not discover with ordinary care. Usual representations and warranties include:

the seller's valid title to the property;
the fact that the property has no encumbrances;
the fact that there is no pending litigation;
the absence of easement rights over the property; and
the seller's full legal authority to execute documents to effect the sale of the property.

5.4 What due diligence is typically conducted in a real estate transaction?

The buyer should conduct due diligence on the property before closing the transaction. Due diligence typically examines the transferor's title documents, the land grant certificate and the land use certificates. It is also important to check any instruments registered under the Registration Law and the Myanmar Companies Law under which encumbrances may have been created over the land. It is also vital to conduct on-site due diligence, as title documents and registration details may not reveal the true identity of all persons with rights to use the land based on its historical usages. On-site visits should also be conducted to check whether there are any encroachments on the land.

5.5 What are the formal and documentary requirements for conclusion of a real estate transaction?

The sale and purchase agreement (SPA) is the formal document representing the relationship between the parties. The SPA must be stamped in accordance with the Myanmar Stamp Act and should also be registered at the Office of Registration of Deeds (ORD) within four months of the date of entering into the SPA.

For leases, the lease agreement is the formal document representing the relationship between the parties. The lease agreement must be stamped in accordance with the Myanmar Stamp Act and long-term leases require compulsory registration at the ORD within four months of the date of entering into the lease agreement.

5.6 What is the process for concluding a real estate transaction? How long does this take? What costs are incurred?

The SPA is perfected upon having in place an executed and stamped SPA which should be registered with the ORD within four months of its execution. The registration fee is 0.5% of the value of the transaction.

A lease (less than one year) is perfected by stamping and execution. Leases above one year require compulsory registration with the ORD. The registration fee is 0.5% of the average annual rent.

Lease agreements are also subject to stamp duty. The rate will depend on the term of the lease, which is:

0.5% of the average annual rent for a lease not exceeding three years; and
2% of the average annual rental for a lease of three years or more.

An additional stamp duty may apply on a premium or advance payment of the lease.

5.7 What are the respective obligations and liabilities of buyer and seller, and what are the consequences of any breach?

The duties of the seller are as follows:

to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not discover with ordinary care;
to produce to the buyer on its request for examination all documents of title relating to the property which are in the seller's possession or power;
to answer to the best of its information all relevant questions put to it by the buyer in respect to the property or the title thereto;
on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property when the buyer tenders it for execution at a proper time and place;
in between the date of the contract of sale and the delivery of the property, to take as much care of the property and all documents of title relating thereto which are in its possession as an owner of ordinary prudence would take of such property and documents;
to give, on being so required, the buyer, or such person as it directs such possession of the property as its nature admits; and
to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date and, except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing.

The rights of the seller are as follows:

the right to the rents and profits of the property until the ownership thereof passes to the buyer; and
where the ownership of the property has passed to the buyer before payment of the whole of the purchase price, the right to a charge upon the property in the hands of the buyer, any transferee without consideration or any transferee with notice of the non-payment, for the amount of the purchase price, or any part thereof remaining unpaid, and for interest on such amount or part from the date on which possession has been delivered.

The duties of the buyer are as follows:

to disclose to the seller any fact as to the nature or extent of the seller's interest in the property of which the buyer is aware, but of which it has reason to believe that the seller is not aware, and which materially increases the value of such interest;
to pay or tender, at the time and place of completing the sale, the purchase price to the seller or such person as it directs; provided that, where the property is sold free from encumbrances, the buyer may retain out of the purchase price the amount of any encumbrances on the property existing at the date of the sale and pay the amount so retained to the persons entitled thereto;
where the ownership of the property has passed to the buyer, to bear any loss arising from the destruction, injury or decrease in value of the property not caused by the seller; and
where the ownership of the property has passed to the buyer, as between itself and the seller, to pay all public charges and rent which may become payable in respect of the property, the principal moneys due on any encumbrances subject to which the property is sold, and the interest thereon afterwards accruing due.

The rights of the buyer are as follows:

where the ownership of the property has passed to it, to the benefit of any improvement in, or increase in value of the property, and to the rents and profit thereof; and
unless it has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under it, to the extent of the seller's interest in the property, for the amount of any purchase money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when it properly declines to accept the delivery, for the earnest/deposit money (if any) and the costs (if any) awarded to it of a suit to compel specific performance of the contract or to obtain a decree for its rescission.

Depending on the SPA, the non-breaching party may have a right to terminate the lease agreement and to claim for damages (liquidated or unliquidated) in a Myanmar court for such breach. If the breach is of such a nature that compensation is not sufficient/appropriate, a suit for specific relief may be filed whereby the court may order the breaching party to specifically perform any part of the contract.

5.8 What taxes are payable on a real estate transaction?

A real estate transaction will typically be subject to capital gains tax (CGT) and stamp duty. CGT will apply on the sale of capital assets (including immovable property) in Myanmar. Stamp duty is normally payable at a rate of 4% (2% duty rate plus 2% additional surcharge), but may vary depending on the location of the property.

The value of the real estate will be assessed by the authorities before the payment of taxes. Normally, CGT is payable by the seller, while stamp duty is payable by the buyer, unless otherwise agreed under the terms of the contract.

In addition, the buyer (assumed to be an individual/citizen) must be able to show proof that the money used to purchase the real estate has already been properly taxed. Otherwise, the buyer can be subject to a tax on undisclosed sources of income, which ranges from 6% to 30%, depending on the amount of undisclosed income.

For transactions involving a real estate company, the company will be subject to:

corporate income tax of 25% based on taxable income (unless covered by an income tax exemption); and
3% commercial tax for the sale of buildings built and sold in Myanmar.

Further, the applicable fee for registration with the ORD is 0.5% of the value of the transaction.

6 Real estate finance

6.1 Who are the most common providers of real estate finance in your jurisdiction? Do any restrictions apply in this regard?

Banks and financial institutions are the most common providers of finance for real estate transactions. Offshore financing requires the approval of the Central Bank of Myanmar in accordance with the Foreign Exchange Management Laws.

6.2 What forms of real estate finance are available in your jurisdiction?

Acquisitions by Myanmar citizens are generally financed by banks on a secured basis, which is further discussed under question 6.4. In accordance with the Transfer of Immovable Property Restriction Act (TIPRA), foreigners cannot purchase or own land in Myanmar. However, leasehold rights can may be obtained by a foreign investor through long-term leases through the Myanmar Investment Commission and in special economic zones. Financing for the development of the property may be obtained through shareholder loans, onshore loans or offshore bank/financial institution loans. Mortgages and other security interests can also be created over long-term leases, as well as receivables, for raising finance.

6.3 What formal, documentary and other requirements do lenders typically require of borrowers?

Lenders usually conduct due diligence on the capacity of the borrower and the bankability aspects of the project. They will then require the borrower to execute a facility agreement and ancillary security documents. The borrower is then obliged to perfect the transaction by stamping and registering the transaction agreements.

6.4 What type of security interests are typically required by lenders?

The typical forms of security include the following.

Mortgage: While six forms of mortgages are recognised in Myanmar, in practice, only three forms are used – the English mortgage, the simple mortgage and the equitable mortgage:

An English mortgage may be created only by way of a registered deed, whereby the mortgaged property is absolutely transferred to the mortgagee with retransfer upon repayment of the mortgaged amount as agreed. The mortgagor under an English mortgage is bound to repay the amount on a certain date. An English mortgage can be created with or without possession. The right to sell the mortgaged property can be exercised without court intervention.
Under a simple mortgage, neither ownership nor possession of the immovable property is transferred to the mortgagee. Under a simple mortgage, the mortgagor keeps possession of the property and is bound to pay the amount secured by the mortgage. Upon default, the mortgagee has the right to cause the mortgaged property to be sold and to apply the proceeds towards payment of the debt owed.
An equitable mortgage, also known as a mortgage by deposit of title deeds, is completed by the deposit of the title deed by the mortgagor with the mortgagee, with the intention of creating a mortgage. Generally, no deed or agreement is required for the creation of an equitable mortgage. The security can be enforced only through court proceedings.

Charge: There are two types of charge in Myanmar:

A fixed charge is against a specific clearly identifiable and defined property. The property under charge is identified at the time of creation of the charge. The nature and identity of the property do not change during the existence of the charge.
A floating charge does not attach to any definite property, but covers property of a circulating and fluctuating nature, such as stock in trade, debts and so on. The charge remains dormant until the relevant undertaking ceases to be a going concern or until the person in whose favour the charge was created takes steps to crystallise the floating charge. A floating charge on crystallisation becomes a fixed charge.

Pledge: A pledge of goods is where possession of the goods is handed over to the lender in order to secure payment. If the borrower defaults, the lender may take over the goods and sell them in order to satisfy the debt. A pledge may be used to secure other obligations besides a debt. Pledges are often created over shares in a company by:

the parties signing a share pledge deed;
the borrower handing over the share certificates; and
the borrower having all documents duly signed and handed over to the pledgee/lender which are necessary to actually effect a transfer of the shares without the borrower's further action, thus allowing self-enforcement (as opposed to court-ordered enforcement) by the lender.

Assignment: An assignment is where one party (the assignor) transfers or agrees to transfer its property or contractual rights to another party (the assignee). Contractual rights are assigned by way of a deed of assignment that is signed by the assignee and the assignor (and the other original party to the contract, if required).

6.5 What is the process for obtaining real estate finance? What costs are payable?

Real estate finance is obtained by entering into a facility agreement and then obtaining security through the security documents. The facility agreement and all security agreements should be stamped in accordance with the Myanmar Stamp Act. Depending on the assessment and type of loan, stamp duty on loans is normally payable at a rate of 0.5%. The applicable stamp duty will vary depending on the kind or security being created, and may range from 0.5% to 2% of the consideration equal to the amount secured by such deed. The security documents should also be registered at the Office of Registration of Deeds, which will typically cost 0.5% of the value.

6.6 How is security enforced in case of any breach?

Lenders may enforce their remedies through foreclosure, sale of the secured property or the appointment of a receiver. However, we are not aware of any examples of enforcement of security over immovable property in Myanmar by foreign lenders. As foreign ownership of real estate is restricted under TIPRA, in practice, the workaround for TIPRA restrictions through the appointment of an onshore security trustee (OST) is still being followed where the OST enforces the security on behalf of the foreign lender. Please see question 2.5 for details.

7 Real estate investment

7.1 Who are the most common investors in real estate in your jurisdiction? Do any restrictions apply in this regard?

Foreign investors are not permitted to own land in Myanmar in accordance with the Transfer of Immovable Property Restriction Act. The most common land form in Myanmar is leasehold land which has been granted by the government. The government typically enters into specific lease agreements with investors to develop particular commercial or residential properties under build-operate-transfer lease agreements, where the ownership of the land remains with the government and the investor earns its revenues through leasing out/operating the properties.

We have typically seen Chinese, Singaporean and Japanese real estate developers in Myanmar.

7.2 What investment vehicles are typically used in your jurisdiction? What are the benefits and drawbacks of each?

Pursuant to the Myanmar Companies Law, the different investment vehicles are as follows:

Myanmar company: A company incorporated in Myanmar in which an overseas corporation or other foreign person (or combination of them) owns or controls, directly or indirectly, an ownership interest of up to 35%;
Foreign company: A company incorporated in Myanmar in which an overseas corporation or other foreign person (or combination thereof) owns or controls, directly or indirectly, an ownership interest of more than 35%; and
Overseas corporation: A company which is incorporated outside Myanmar but is registered in Myanmar (similar to a branch or representative office).

In theory, there are no differences in the benefits and drawbacks of each vehicle. However, in practice, sectorial restrictions will apply. For instance, certain licences may be unavailable to an overseas corporation and the responsible ministry may require the incorporation of a company (Myanmar company or foreign company). Also, a 100% Myanmar company is permitted to own and purchase land, whereas ownership restrictions apply to foreign companies and overseas corporations.

7.3 How are these vehicles established and administered in your jurisdiction?

Entities can be incorporated/registered with the Directorate of Investment and Company Administration (DICA) via the Myanmar Companies Online system. It takes two to three days to complete the process and for the company to receive the registration certificate from DICA.

8 Planning and zoning

8.1 How is land use regulated in your jurisdiction?

The law related to land use and land planning in Myanmar is something of a grey area.

In 2019, a bill for an Urban and Regional Development Planning Law was under reviewed. However, this law has not yet been enacted or enforced.

According to the Myanmar National Building Code 2020, all major land use developments require a planning permit from the Development Planning and Building Authority. However, to date, there have been no established standards of land use permits being granted in accordance with the code. Therefore, according to current practice, land use and planning are still governed by the relevant city/regional development committee laws (for example, the Yangon City Development Committee (YCDC) for the Yangon region; the Mandalay City Development Committee for the Mandalay region). Generally, land use and planning will depend on the classification and location of the land (eg, freehold land, grant land, farm/agricultural land).

8.2 What is the process for obtaining planning permission? How long does this take? What costs are incurred?

The law related to land use and land planning in Myanmar is something of a grey area.

When the Planning Law and rules are in force (see question 8.1), there will be a well-defined application process with fees. Zoning and planning are currently at the discretion of the relevant city development committee and the developer will need to abide by the requirements of the committee. Approval from the Myanmar Investment Commission, sectorial approvals and construction permits will also be required.

8.3 Can a planning decision be appealed?

At present, since there is no specific law in this regard, there is no method to appeal a planning decision.

8.4 What are the consequences of failure to obtain planning permission or to comply with a planning condition?

While there are no formal planning laws or procedures in Myanmar as yet, the general procedure is applicable under the relevant city/regional development committee laws. For example, under the YCDC Law, failure to obtain planning permission from the YCDC could lead to the imposition of fines up to MMK 3 million and/or imprisonment for up to one year.

8.5 Is expropriation of land possible in your jurisdiction?

According to the Myanmar Investment Law, expropriation of investments/land can take place only under the following conditions:

It is necessary for the public interest;
It occurs in a non-discriminatory manner;
It accords with due process of law; and
It involves payment of prompt, fair and adequate compensation.

Moreover, under Article 372 of the Constitution 2008, the state guarantees the right to ownership and use of property if this is not contrary to the provisions of the Constitution and existing laws.

The Land Acquisition, Resettlement and Rehabilitation Law was enacted on 19 August 2019 and will enter into force on the date to be announced by the president. Upon entering into force, it will replace the existing Land Acquisition Act of 1894. Under this law, land acquisition implementation bodies will be established in each state and region, and will be responsible for compensating landowners for land acquisitions as a matter of public interest. However, this law has not yet been enacted. Thus, in practice, it is unclear what level of protection will be afforded by this law. At present, the Land Acquisition Act of 1894 permits land acquisitions based on a clear public purpose and fair and adequate compensation.

8.6 Is confiscation of land possible in your jurisdiction?

Please see question 8.5.

9 Environmental

9.1 What main environmental legal provisions apply to the development, use and occupation of real estate?

The Environmental Conservation Law and its implementing Environmental Conservation Rules, and the relevant city/regional development committee laws, are generally applicable to the development, use and occupation of real estate. The Environmental Conservation Law requires anyone that creates a point source of pollution to treat, emit, discharge and deposit the polluting substances in accordance with the stipulated environmental quality standards. Further, the owner/occupier of real estate which creates a point source of pollution must install or use an on-site facility or controlling equipment to monitor, control, manage, reduce or eliminate the pollution. If this is impracticable, the waste must be disposed of in accord with environmentally sound methods. Further, under the relevant city/regional development committee laws (eg, the Yangon City Development Law), as a general rule, nobody can engage in any activities that may affect the environment, such as soil pollution, air pollution, water pollution or noise pollution, within the city boundaries. Further, nobody can dispose of chemicals and related substances, poisonous substances, radioactive materials or electronic waste in a way that could cause pollution in other places, except those stipulated by the committee in line with the conditions within the city boundaries.

9.2 Who can be held liable for environmental contamination and how are clean-ups effected?

The owner or occupier of real estate can be held liable for environmental contamination depending on who caused the environmental contamination. The Environmental Conservation Law suggests that the occupier of a property should effect the environmental clean-up. However, this can be based on agreement between the parties where one party may indemnify and hold harmless the other party which created the need for the environmental clean-up.

9.3 What environmental provisions and considerations should be factored into real estate transactions?

Real estate transactions should identify the party responsible for maintaining the environmental standards and the party responsible for effecting any environmental clean-ups. A party which may suffer any liability as a result of environmental pollution caused by the other party may also be indemnified in accordance with the agreement.

9.4 What initiatives are in place to promote green buildings and energy efficiency in your jurisdiction?

There are no initiatives in place as yet to promote green building and energy efficiency in Myanmar.

9.5 What types of environmental certifications apply in your jurisdiction?

The relevant provisions on environmental certifications under the Environmental Conservation Law are set out in Notification 616/2015 on the Environmental Impact Assessment Procedure. In particular, the notification imposes onerous obligations on companies that intend to undertake projects that are likely to have adverse effects on the environment. The notification sets out the process with which the owner/developer must comply in order to obtain environmental approval.

Under Notification 616/2015, there are two types of projects:

initial environmental examination (IEE) type projects; and
environmental impact assessment (EIA) type projects.

Depending on the type of project, the owner/occupier of the real estate will need to undertake an assessment and prepare an EIA/IEE report and an environmental management plan in order to obtain an environmental compliance certificate from the Ministry of Natural Resources and Environmental Conservation.

10 Trends and predictions

10.1 How would you describe the current real estate market and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The current real estate market is somewhat slow, given the COVID-19 restrictions and the prevailing political situation. We are not aware of any new legislative reforms over the next 12 months; however, it is possible that the government may enact the Land Acquisition, Rehabilitation and Resettlement Law of 2019 and also introduce new planning laws. The exact timeframe for such potential developments cannot be confirmed.

11 Tips and traps

11.1 What are your top tips for the smooth conclusion of a real estate transaction and what potential sticking points would you highlight?

Proper due diligence of the land before a transaction is essential. Ascertainment of the land rights and necessary land conversions is equally important. Thereafter, the transaction documents should legally accord with Myanmar laws, with stamp duty paid; and registration should be completed with the Office of Registration of Deeds within four months of execution.

Co-Authored by : Diberjohn Balinas (Senior Tax Advisor) and Kyaw Kyaw Han (Legal Advisor)

Contact details:

Nishant Choudhary, Partner
nishant.choudhary@dfdl.com

Rohan Bishayee, Legal Adviser
rohan.bishayee@dfdl.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Myanmar: Real Estate Comparative Guide