Concessions Available for Resorts under Development in Maldives: A Quick Guide

2 May 2024

This guide explains the concessions available to leaseholders of islands, lands or lagoons leased for development of tourism properties in the Maldives, with a particular focus on tourist resort developments that have started construction pursuant to the Head Lease Agreement and requires additional time to complete the construction of the property. 

Keywords & Definitions used in this Guide

The following definitions apply in this guide.

  • Construction Period: The period granted under the Head Lease Agreement for the completion of the construction of the tourist establishment.
  • CP Regulation: Regulation on Construction Period Extension and Deferral of Land Rent and Fines (Regulation No. 2022/R-236).
  • CSR Payment: Corporate Social Responsibility payment settled to Tourism Industry Trust Fund.
  • Extended Construction Period: Extended construction period granted by the MOT upon application by the Head Lessee in accordance with the CP Regulation.
  • Head Lease Agreement: Lease Agreement signed between the Government of Maldives, represented by the MOT, and Head Lessee specifying the terms under which an island, land or lagoon is leased to the Head Lessee by the Government for development and operation of a tourist establishment.
  • Head Lessee: Lessee or leaseholder under the Head Lease Agreement.
  • MOT: Ministry of Tourism.

1. Available Concessions

The concessions available to properties that have started construction pursuant to the Head Lease Agreement and requires additional time to complete the construction of the property are:

  • Construction Period Extension; and
  • Deferral of Land Rent Payments and Fines.

The main legislation pursuant to which these concessions are granted is the CP Regulation formulated by the MOT and made effective on 6 December 2022.

2. Construction Period Extension

What’s a Construction Period?

Construction Period is provided in the Head Lease Agreement and starts from the commencement date of the Head Lease Agreement. Generally, the Construction Period granted under the Head Lease Agreement for islands and lagoons is 36 months and 48 months, respectively. The Construction Period is granted by the MOT and MOT has the discretion to further extend it in accordance with the CP Regulation.

How can the Construction Period be Extended?

The Head Lessee has to agree to the following two main conditions.

  1. Provide commitment on completion of construction – that is commitment on either to complete the full construction of the property within the Extended Construction Period; or to complete and start operation of one phase of the property within the Extended Construction Period if requesting for a phased out development.
  2. Settlement of a CSR Payment – the CSR Payment amount that has to be settled depends on the size and geographical location/zone of the property and the duration (number of months) for which the extension is requested. The table specifying the CSR Payment rates are provided in Schedule 1 of the CP Regulation. The CSR Payment has to be settled in quarterly instalments within 3 years from when the property is commissioned or begins operation.

3. Deferral of Land Rent Payments and Fines

What is Tourism Land Rent?

Land rent is the rent payable to the Government based on the size of the property, starting from the date of expiry of the Construction Period or from the property commission date, whichever happens earlier.

Land rent is charged on a calendar year basis and has to be paid in advance in quarterly installments, prior to the beginning of each quarter. As such, where land rent is not paid by the due date a fine of 0.0493% of the unsettled amount per day would accrue until the date of settlement. 

There are specific rules that apply in relation to the determination of temporary land area during the development stage and final land area after completion of the construction of the property – based on which the land rent payable will be determined. Explore key details about tourism land rent in our Insight on the Maldives Tourism Land Rent Regime here: bnilaw.co/tourism-land-rent-maldives-resorts-and-hotels.

Which Portion of the Land Rent and Fines can be Deferred?

  • Land rent and fines accrued after expiry of the original Construction Period; and 
  • Land rent payments applicable to the Extended Construction Period.

Options for Land Rent and Fines Deferral

The Head Lessee will have the discretion to choose one of the following options when requesting for the deferral of land rent and fines.

4. Addendum to the Head Lease Agreement

Construction Period extension and deferment of land rent and fines have to be formalised through an Addendum brought to the Head Lease Agreement, which should include the following main terms:

  • Period granted as the Extended Construction Period. 
  • If land rent and fines are being deferred, the terms under which the deferral is granted and the period for which the deferral is granted.
  • That the MOT has the discretion to invoke termination of the Head Lease Agreement where the development is not completed within the Extended Construction Period.

5. Consequences of Non-Compliance

Where the Head Lessee fails to complete construction and start operation of the property within the Extended Construction Period, the following consequences will apply:

  • The Head Lessee will be required to pay all deferred land rent plus fines as a lump sum payment within 24 months from expiry of the Extended Construction Period.
  • If all the deferred land rent plus fines are not settled within 24 months from expiry of the Extended Construction Period, MOT will have the discretion to terminate the Head Lease Agreement.