Answer ... Yes, security in the form of mortgages, charges or assignments can be attached to real estate in Myanmar. Depending on the form of security, they are on equal footing. They may be prioritised through ranking in the respective deed of charge/mortgage or assignment.
Foreign lending: TIPRA restricts foreigners (ie, foreign-owned companies) from owning or acquiring property by way of purchase, gift, pawn, exchange or transfer. Mortgages or charges under Myanmar law are considered to be transfers.
However, Section 228 of the MCL states that the grant of a mortgage or charge, or the exercise of rights by or on behalf of the mortgagee or chargee under such a mortgage or charge to realise the value of any property secured by the mortgage or charge, will not be in breach of TIPRA. Section 229 of the MCL further states that all mortgages and charges will be rendered void if not registered with the Directorate of Investment and Company Administration.
Before the enforcement of the MCL, to mitigate the TIPRA restrictions, foreign lenders used to appoint a local bank as the onshore security trustee (OST), and the security used to be created in the name of the OST on behalf of the foreign lender. However, this concept was never tested in a Myanmar court. This was the most viable means of mitigating these restrictions, given that the Central Bank of Myanmar (CBM) approved the offshore loans where the submitted documents attested to the structure of the security along with the OST arrangement.
Another restriction under TIPRA does not permit the lease of immovable property to foreigners for more than one year. However, as an exception, a Myanmar Investment Commission company can obtain land rights authorisation through which it can lease land for 50 years, with two 10-year extensions. Therefore, for projects which are owned by foreign investors, the Myanmar Investment Law (MIL) itself gives the right to create a mortgage or charge over land rights authorisations in favour of foreign lenders. Further, pursuant to the MCL, a mortgage or charge over the long-term lease can be granted to a foreign lender. Thus, from reading of the MIL together with the compliance requirements under the MCL, security over real property (in the form of a mortgage or charge over the leasehold right) can be granted to foreigners for projects owned by foreign investors. For Myanmar-owned projects in which the Myanmar investor also has title over the land, the security (eg, mortgage or charge) is granted over the project land itself.
Further, for investments within special economic zones (SEZs), the investor (whether a citizen, a foreign national or a joint venture) obtains land use/lease rights from the management committee of the SEZ for 50 years with an option to extend by another 25 years. Section 80(f) of the SEZ Law also gives a right to investors in SEZs to create a mortgage or charge over the land use/lease rights in favour of foreign lenders with approval from the management committee. Therefore, security over the land use or leasehold rights can be granted by the SEZ investor in favour of the foreign lender with approval from the management committee.
Also, there are no restrictions on obtaining offshore loans. Rather, the Foreign Exchange Management Law facilitates the obtaining of offshore loans with the approval of the CBM. While previously, as a general practice, an OST was appointed for enforcement purposes, the MCL does not make it necessary to appoint an OST in order to create a security. However, in practice, the previous workaround for TIPRA restrictions by the appointment of an OST is still being followed. This is because although the MCL mandates the registration of security under Section 228, Section 464 states that the provisions of the MCL relating to foreign companies shall not affect the operation of any provision of TIPRA.