Within Myanmar, the legal structure regulating real estate ownership is founded on the principle that the state retains ultimate ownership of all land. Article 37(a) of the Constitution of Myanmar states that: “The Union is the ultimate owner of all lands and all natural resources above and below the ground, above and beneath the water and in the atmosphere in the Union". This provision highlights the nation's policy, wherein the government exercises control over land resources, granting rights of land use rather than transferring ownership. Hence, private individuals and entities can obtain land use rights through grants, leases, and permits, but ultimate ownership remains with the state. This article will explore land leasing in Myanmar, focusing on how foreign investors can navigate to lease land despite ownership restrictions.

Categories of Land in Myanmar

In Myanmar, several types of land coexist (such as freehold land, grant land, farm/agricultural land, garden land, grazing land, vacant, fallow and virgin land, forest land, town land, village land, monastery land, and land used for state defense and security), each of them having a different allowed use. Only a limited number of land types may be leased to foreigners. The following are the most important types of land that can be leased to a foreigner or a foreign-owned entity.

1. Freehold Land

Freehold land, known as "ancestral land" in Myanmar, requires no rent for plots under a quarter acre. It is privately owned, leasable, and transferable. The government can reclaim it for state interest under the Land Acquisition Act of 1894, with compensation required.

2. Grant Land

Grant land is government-owned and leased to Myanmar citizens or Myanmar-owned companies for 30, 60, or 90 years, depending on land use. Lease terms are extendable upon application and decided by the government. Grant land is transferrable and leasable to Myanmar citizens or 100% Myanmar-owned companies. Land revenue payments to the government are required. Grant land is perhaps the most common form of land within city limits in Myanmar.

3. Farmland

In Myanmar, farmland is regulated by the Farmland Law of 2012 and owned by the government, which allocates it to citizens for agriculture. The Ministry of Agriculture, Livestock and Irrigation may authorise the use of the farmland for purposes other than agricultural, such as for a commercial real estate development.

Land Use Restrictions for Foreigners in Myanmar

The Transfer of Property Act of 1882 and the Transfer of Immovable Property Restriction Act of 1987 (TIPRA) govern property ownership in Myanmar. The TIPRA sets strict restrictions on foreign ownership of immovable property in Myanmar, which includes land, buildings, and related assets. Foreign nationals and foreign-owned companies (foreigners) cannot own or acquire immovable property, and leases to foreigners cannot exceed one year. It needs to be noted that the Myanmar Companies Law of 2017 defines a foreign company as a company incorporated in Myanmar in which a company incorporated overseas or a foreign national owns more than 35% of shares. However, the TIPRA seems to apply its restrictions to any foreign-owned company incorporated in Myanmar even if only one share of such a company is owned by a company incorporated overseas or a foreign national.

Foreign ownership arrangements, such as nominee structures or holding minimal shares in a local company, are strictly prohibited and can lead to severe penalties. Due to these restrictions, foreigners can only lease property, either from the government or from Myanmar nationals and 100% Myanmar-owned companies. Leases exceeding one year usually require approval of the Myanmar Investment Commission (MIC), as discussed below.

Land Use Rights under the Myanmar Investment Law

Foreign investors can apply for a Land-Rights Authorization under the Myanmar Investment Law of 2016 to sign long-term leases with private landowners or government bodies. To qualify, they must first obtain a:

• Permit, or
• Endorsement

from the MIC. The authorisation allows leases up to 50 years, with two possible 10-year extensions. The MIC may approve longer terms to encourage development in slower growth areas.

Application Process for Permit:

1. Submit Proposal: Begin by submitting the proposal for the investment permit.
2. Proposal Review:

• If the proposal is accepted, it will move forward for a decision within 60 days.
• If the proposal is deemed incomplete, a rejection will be issued within 15 working days.

3. Issuance of Permit: If the proposal is approved, the investment permit will be issued within 10 working days.
4. Rejection Notice: If the proposal is rejected, a notice with the explanation will be sent within 5 working days of the decision.

Application Process for Endorsement:

1. Submit Endorsement Application: Begin by submitting the application for an MIC endorsement.
2. Application Review:

• If the application is accepted, it moves forward for a decision. A decision on the accepted application will be made within 30 days.
• If the application is incomplete, a rejection will be issued within 15 working days. If the required information is not provided within 20 days, the application will be rejected.

3. Issuance of Endorsement: If the application is approved, the MIC endorsement will be issued within 10 working days.
4. Rejection Notice: If the application is rejected, a notice with the explanation of grounds of rejection will be sent within 5 working days of the decision.

Land-Rights Authorisation Application Process

The Land-Rights Authorisation is a distinct process, even if applied for with the Endorsement or Permit.

The application requirements are as follows:

1. Include property details (area, type, location), landlord identities, and any necessary State or Regional Government approvals.
2. Indicate if the land use will significantly alter the property's topography or elevation.
3. Submit a draft lease agreement and specify the requested land-rights authorisation duration.

Review Process:

1. The MIC or relevant State/Regional Committee evaluates the application within 30 days.
2. Authorisation is issued within 10 working days if approved.
3. A copy of the authorisation is sent to the State/Regional Government Authority and relevant Union Ministries.
4. The MIC or relevant State/Regional Committee may request additional information; failure to provide it on time will result in application expiration.

Land Use Rights under the Special Economic Zone Law

Section 79 of the Special Economic Zone Law of 2014 allows for leases up to 75 years, which is 50 years plus an extra 25 years for foreign-owned companies formed in Special Economic Zones (SEZs).

Registration of Lease Agreements with the ORD

In common law, a deed is usually defined as a written document which is executed with the necessary formality, that is, more than a simple signature, and by which an interest, right or property passes or is confirmed, or an obligation binding on some person is created or confirmed. Deeds are generally enforceable despite lack of consideration.

Registration of deeds including lease agreements can be either mandatory or optional, according to the Deed Registration Law of 2018 which replaced the Registration Act of 1908. According to Section 16(d), leases for immovable property that are longer than a year or that require annual rent must be registered with the Office of the Registration of Deeds (ORD) within 120 days of execution. Section 17(c) states that registration is optional for leases less than a year. If registration is done after the deadline but before 120 days, late registration may be permitted with a fine.

Under Section 47 of the Deed Registration Law, a registered deed related to immovable property will override any oral agreement or declaration relating to such property that is contrary to the terms contained in the registered deed. Moreover, pursuant to section 50 of the Registration Act, if a lease agreement was duly registered, it takes effect in relation to the property leased against every unregistered document relating to the same property, Thus, registering a lease agreement with the ORD should prevent a landlord from the possibility of re-leasing the premises to another lessee.

The lease agreement, proof of identity, land ownership documents, and other forms pertaining to the property are required for registration. Additional paperwork, including a board resolution and a certificate of incorporation, is required for corporate lessors and lessees. For leases longer than a year, there is a registration charge equal to 0.5% of the average annual rent. The original lease agreement is returned with a registration number attached after registration.

Stamp Duty for Leases in Myanmar

The Stamp Act of 1899 specifies which legal documents, such as lease agreements, are subject to stamp duty. Stamp duty must be paid before or at the time of signing the document unless executed outside Myanmar. A penalty of up to three times the owed amount applies if stamp duty is not paid on time or in full.

Pursuant to Section 35(a) of the Stamp Act, failure to affix an instrument with its appropriate stamp duty shall impede both its registration and acceptance as evidence (if necessary). Thus, prior to registering a lease agreement, it would have been necessary to affix it with the proper stamp duty, which must be paid at the Internal Revenue Department (IRD) under the Ministry of Finance and Planning.

Stamp Duty Rates for Leases:

• 0.5% of the total amount payable for a lease under 1 year;
• 0.5% of annual rent for a lease between 1 and 3 years;
• 2% of the annual rent for a lease over 3 years;
• 2% of rent which would be paid for the first ten years for a lease of an unspecified term.
• 2% of a deposit paid in addition to rent.

Law Hero is equipped to support clients as they maneuver through Myanmar’s intricate legal environment, especially regarding real estate issues. Our firm offers specialised advice on acquiring land use rights. Whether you engage with freehold, granted, or government-owned land, Law Hero may assist to grasp the complexity of land use regulations and secure the required permits and approvals, enabling smooth land transactions in line with Myanmar law.