Published on Monday, 06 August 2012 20:55
Photo shows an area of Anawrahta Industrial Zone
High property prices in Myanmar have caused many local and foreign businesspeople to delay their investment plans.
The property market has not seen much activity as investors are waiting for property prices to drop after the current five-year tax regime expires this month (August), sources from real estate agencies said.
U Soe Thein, chairman of Myanmar Investment Commission, announced that the government will slash land prices in industrial zones, in the same way car prices were reduced previously. He said property prices in Myanmar are among the highest in Asia.
A source from the Myanmar Estate Services Association quoted U Soe Thein as saying that the current tax regime should not be expanded after it expires.
Despite the announcement, land prices have remained high.
A source in the Real Estate Services Association foreign investors often complained about the ever-increasing property prices in Myanmar.
“At international workshops and seminars, people often commented that the land prices are too high in our country. Such comments got into the news and discouraged foreigners from investing. Foreign investors are waiting for land prices to come down,” the source said.
The current tax regime has been blamed for encouraging speculation in the property market. Both the buyer and the seller of a property are not required to produce evidence the income source when they pay a 15 percent tax on the agreed price.
U Aung Moe Kyi, director of Internal Revenue Department, said the government will announce soon whether the tax regime will be extended or not.
If the current tax regime is replaced by the older one, property speculation is expected to be less rife. The older regime requires the buyers to show the source of their income and to pay a 30 percent tax on the agreed price.
U Zaw Zaw, manager of Unity real estate agency, said it is doubtful whether the government will make plans to slash land prices.
“Sales in the industrial zones occurred only in Thilawa [industrial zone]. In other areas, land prices rose to as high as K250 million per acre when news came out about a large industrial zone there. But the price has now come down to K150 million per acre after it became clear that the project did not materialise,” he said.
Business tycoons and economists said the government is likely to withdraw permits of the businesses that fail to make use of the land plots that they obtained under the previous military regime.
Dr. Zaw Oo, an economic advisor to the President, said that the country’s sluggish economy has led to speculation on land prices.
“When businesspeople do not make profits in their businesses, they turn to the real estate market. They will shift their investment to other businesses if those sectors see a higher growth. Only then, property prices will decline,” he said.
The Department of Human Settlement and Housing Development announced that industrial firms will see their land permits withdrawn if they could not implement their projects on the plots within the specified period.
At present, construction in most of the industrial zones, except in Dagon Seikkan and Thilawa, is being started in Yangon.
U Than Oo of Mandine real estate agency said skyrocketing prices in the real estate market do not reflect the country’s economic development. “Property speculators, including nationals and foreigners from neighbouring countries, are accumulating land plots to sell them at high prices,” he said.
As Myanmar businesspersons are still preparing for the start of ASEAN Economic Community and ASEAN Free Trade Area in 2015, foreigners are buying land plots through proxies. Foreigners are not eligible to purchase land in Myanmar.
A Myanmar businessperson said local entrepreneurs have purchased land for joint ventures when foreign investments flood into the country.
An industrialist in Hlaingtharyar industrial zone said, “A land owner-cum-member of Parliament said in a Parliamentary session that his company has already created into an industrial zone. Actually, his land plots are just fenced in. Some of them are seen only with concrete foundation or warehouses. He sells his land plots only two to 10 acres in one deal.
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