On 9 January 2018, the Cabinet approved in principle a draft bill (Bill) that enables a new form of proprietary right to be created on land and condominium units for a maximum term of 30 years - an alternative to the traditional freehold and leasehold rights.
The Bill, if enacted, will unlock certain limitations of leasehold rights, including the inability to sell, transfer or create security, and it being merely a personal right. With its perks, the Bill aims to boost investors' confidence in the real estate sector by allowing more efficient use of land and condominium units, enabling greater economic benefits to be reaped by investors.
Under the current draft Bill, the owner of land or condominium units may grant a right to use the property, by way of registration, to a grantee for a maximum term of 30 years. This right, once registered and evidenced by the proprietary right certificate issued by the land registry office, allows the grantee to lease out, sell, transfer, pass on as inheritance, or mortgage the right. The grantee also has the right to alter or construct structures on the property without obtaining the grantor's consent. Upon the expiry, the ownership of the structures or alterations on the property become the grantor's, unless agreed otherwise.
It is worth noting that the current draft Bill only allows the creation of a right on the ownership of land with title deeds and condominium units, and not other kinds of property interests. Currently, the Bill awaits review by the Council of State before being submitted to the National Legislative Assembly for consideration, and passed into law.
Real estate developers, especially those who plan to develop projects on leasehold land, should take this new development into consideration when structuring the project and negotiating with landlords and lenders.
We will continue to monitor the developments on the Bill, and keep you updated accordingly.