The new Condominium Law has not helped Myanmar’s dormant condominium market. Before the law was enacted in early 2016, many people hoped it would spur development – especially because it allows foreign ownership. But gaps in the law have created more uncertainty. 

Developers and buyers are now waiting on follow-up bylaws, which they hope will provide clarity. It is not known when they will come into force.

Three steps forward

There are three steps to making the law more effective. 

First, the bylaws need to clarify the nature of land ownership described by the law. Second, the bylaws should look abroad for provisions that clarify foreign ownership and the management of condominiums. Finally, two external factors holding back the market must be addressed.

Step 1 - Land ownership

The Condominium Law requires condominium projects be constructed on collectively owned land - that is, land of beneficial interest under prevailing law to all collective owners. However, it does not say which types of land can be collectively owned. Alexander Bohusch, Partner at Luther Law Firm, identifies this as one of the biggest questions with the new Law, which has to be clarified in its bylaws. He points out that “if only specific types of land, such as grant land and freehold land, can be used for the construction of condominiums, then the limited availability of suitable land may limit the registration of properties under the new Law.”

The issue is that many projects are built under build-operate-transfer arrangements on leased land.  Under these arrangements, developers give up the land and property after a set period and cannot obtain strata title for buyers. 

The practical approach is for the bylaws to include this kind of land, which is mostly owned by the government. This calls for a broader definition of “collectively owned land” that includes long-term leases. 

Step 2 - Thailand’s foreign ownership lessons

The Condominium Law allows 40% foreign ownership of a condominium, but these rights must be clarified. Thailand’s effective condominium law, which permits a slightly higher 49% foreign ownership, provides a good model to follow.
 
In Myanmar, earlier law forbids transferring land or property to foreigners, with limited exemptions. Thailand’s law has a clear statement that previous inconsistent laws are superseded. Myanmar’s law needs a similar statement, or to clarify that it is an exemption.

It is assumed that foreign share in Myanmar will be by the number of units – that is, 40 of 100 units is 40% of a condominium. Where unit sizes vary, this is not an accurate measure. For ownership share, Thailand’s law uses the ordinary measure of floor space, which is proportionate.

There should also be a clear statement in Myanmar’s law that foreign ownership extends to foreign entities. Thailand’s law spells out that foreign entities, and not just individual foreigners, are able to own units. 

Owners Corporations

A longer-term concern is that the Condominium Law has relatively little to say about condominium management. Laws from abroad often have detailed provisions for forming, managing and running an owners corporation. 

For one thing, there is nothing in Myanmar’s law about an owners corporation enacting and enforcing its own bylaws, which would ordinarily include model or mandatory bylaws. 

The law also lacks provisions about dispute resolution between owners, tenants and/or owners corporations. This can provide for structured conflict resolution and help enforce owners corporation bylaws. 

Further, there is no requirement for an owners corporation to maintain insurance over a building. This will become more relevant as Myanmar’s insurance market opens.

Step 3 - External market factors

Outside the law, two external factors are holding back the market most.

The first is unhelpful parking regulations. In Yangon, Myanmar’s commercial centre, developers are forced to allocate 1.2 parking spaces per unit. Tony Picon, Vice Chairman of Colliers International’s Yangon office, says these regulations are really causing problems. He explains that “the more units you have in the condominium, the more parking spaces and the less feasible the project becomes,” Demand is concentrated in the lower- to mid-market, where buyers are less likely to own a car. A lower parking space ratio could result in more smaller units.

The second factor is a lack of access to financing. Stephen Lee, Director at Yangon real estate firm RE/MAX 777 LUX, points out that most property transactions are outright and in cash, rather than on bank loans. He explains that prices have stayed too high in a market where “there’s no pressure from the bank because [people] don’t borrow.” Without borrowing, the government has few policy levers to influence the market.

There are two promising developments: a budding mortgage market and Myanmar’s forthcoming credit bureau. If buyers can build up a good credit score, securing a mortgage on reasonable terms will become easier. Certain local banks now offer mortgages of up to 15 years. These are welcome signs of progress.

Ultimately, though, there are no quick-fixes for the lagging condominium market. Improving the law and addressing the external market factors will be positive steps.