Resort Leases under the Maldives Tourism Act: Acquisition, Term and Transfer

Resort development remains the largest channel for foreign capital into the Maldives. It is governed by a legal regime which is separate from ordinary foreign investment: the Maldives Tourism Act (Law No: 2/99).

The act was first gazetted in 1999 and has been amended 16 times, most recently in December 2025. It is the leasehold provisions of the act, and not general property law, which govern how a foreign investor acquires rights over a resort island.

This article explains how a resort lease is granted, the lease term and the rent, what the lease agreement must contain, and how leasehold rights may be mortgaged, transferred and terminated.

State ownership and the investor's leasehold interest

Under the Tourism Act, the state remains the owner of resort islands, land and lagoons. An investor, whether foreign or Maldivian, acquires a leasehold interest and not title. This is consistent with the prohibition on foreign ownership of land in the Constitution.

For this reason, every resort transaction in the Maldives, whether a new island award, a resort acquisition or a refinancing, depends on the terms of the government lease and not on a title deed.

In practice, a foreign investor holds the lease through a company registered in the Maldives under the Foreign Investment Act and the Business Registration Act. The investment must also be approved under the foreign investment legislation before the lease is granted or acquired.

How a resort lease is granted

Section 5 of the act, as amended, provides three routes to a resort lease.

The first is public tender. Under Section 5(a)(1), the Ministry of Tourism invites bids for a designated island or parcel of land, and the lease is awarded to the party submitting the best-qualified proposal under pre-established procedures. In practice, a minimum lease acquisition cost is set for the tender and bidders are required to provide bid security.

The second is lease by proposal. Under Section 5(a)(2), an island, land or lagoon may be leased on a proposal submitted to the Ministry of Tourism which sets out the project intended for it. The proposal must comply with the act and the regulations made under it. This route is an exception to the tender requirement, and whether it is available at a given time depends on government policy.

The third is allocation as a cross-subsidy. Under Section 5(a)(3), an island, land or lagoon may be allocated for the development of a tourist resort or an integrated tourist resort to a party which carries out or finances a significant project determined by the government. The allocation must be made under an economic, social or other key policy determined by the government for public benefit, and in accordance with principles published in advance. The value of the investor's project is recovered by deduction from the land rent payable for the island.

In addition to these three routes, the Sixteenth Amendment (Law No: 26/2025) permits an island, land or lagoon to be leased directly to a company in which the government holds at least 45 per cent of the shares, with the approval of the Cabinet.

A resort lease may also be acquired from an existing lessee, either by transfer of the lease or by acquiring the shares of the company which holds it. This is discussed below.

Lease term and extension

The current lease term was fixed by the Seventh Amendment (Law No: 8/2015) and, following the most recent renumbering, is now found in Section 9 of the act. A tourism lease runs for a maximum of 50 years from the date of the lease agreement.

A lessee may apply to extend the lease by a further 49 years. This brings the total term to 99 years, which is the maximum lease period the Constitution permits for a foreign party.

The fee for the extension has been amended more than once. The current position is that a fee of USD 10 million is payable for an extension from 50 years to 99 years. The Thirteenth, Fifteenth and Sixteenth Amendments each allowed a reduced fee of USD 5 million for a limited period. The last of these periods expired in June 2026.

As the act is amended frequently, current legal advice should be obtained before an application for extension is made.

Land rent

The lessee pays land rent to the government throughout the term of the lease. The current basis of calculation was introduced by the Tenth Amendment to the act in 2020. Rent is calculated by reference to the registered land area of the island or land, the atoll in which it is located, and whether the island is inhabited or uninhabited. The rates for land on inhabited islands are half of those for uninhabited islands.

Land rent is payable in United States dollars, quarterly and in advance, before the start of each quarter. Rent for uninhabited islands is collected by the Maldives Inland Revenue Authority. A fine of 0.0493 per cent per day accrues on any amount which is not paid by the due date.

Land rent does not become payable on the date of the lease. It is payable from the expiry of the construction period stated in the lease agreement, or from the date on which the resort is permitted to open, whichever is earlier.

Construction period

The lease agreement gives the lessee a fixed period in which to build and open the resort. In practice, the period is usually in the region of 36 months for an island and 48 months where a lagoon is to be reclaimed.

The construction period may be extended with the approval of the Ministry of Tourism. Under the Sixteenth Amendment, a fee prescribed by regulation is payable for the extension. An investor should allow for this cost where the development programme is uncertain, as land rent becomes payable once the original period expires whether or not the resort has opened.

Terms of the lease agreement

Every resort lease agreement is required to specify:

• the island, land or lagoon which is leased;
• the lease period;
• the period granted for construction and the date on which the resort must begin operation;
• the circumstances in which the lease may be terminated early and the procedure to be followed;
• the procedures for sub-leasing the resort or transferring its management to a third party; and
• the procedure to be followed if the lessee breaches the agreement.

These requirements mean that the lease agreement, and not the act alone, defines the position of the investor.

Mortgage, sub-lease and transfer

The act and the Regulation on the Grant of Rights of Tourist Resorts (Regulation No: 2010/R-14) govern how a lessee may deal with its leasehold rights.

A lessee may mortgage its leasehold rights to a bank or financial institution with the prior written consent of the Ministry of Tourism. The mortgage is recorded in the resort registry. As the lessee has no title to the land, this is the main form of security available to a lender.

A lessee may sub-lease the resort, or appoint an operator under a management agreement, with the consent of the ministry. The sub-lease or management agreement must be registered with the ministry. A lessee may also grant long-term leases of individual villas under the strata lease provisions of the act and the regulation on strata leases (Regulation No: 2023/R-154).

Assignment or sale of leasehold rights and resort shares requires the written approval of the Ministry of Tourism. On an application to transfer a lease, the ministry publishes a notice and allows a period for any person with a claim against the lessee to come forward. The ministry also checks that rent and other sums due to the government have been paid. The written consent of any mortgagee or sub-lessee is required, and a fee is payable under the regulation.

A purchaser may therefore acquire an existing resort in two ways: by taking a transfer of the lease, or by acquiring the shares of the company which holds the lease. The choice affects the consents required, the liabilities assumed by the purchaser and the tax treatment of the transaction.

Expiry and termination

On expiry or annulment of a lease, the government is required to pay the depreciated value of the resort's buildings within two years.

A lease may be terminated early in the circumstances set out in the lease agreement. In practice, these include failure to pay land rent and failure to complete the resort within the construction period.

The Fifteenth Amendment (Law No: 2/2025) added a further ground. A resort may be closed temporarily for redevelopment only with the approval of the Ministry of Tourism and an amendment to the lease agreement. If the work is not completed within the approved period, the ministry may cancel the lease without compensation to the lessee.

The act also permits the government to take back an island which is required for national defence, subject to payment of equitable compensation.

Comment

A resort lease is a leasehold interest granted by the state and not title. Due diligence should focus on the terms of the lease agreement and not on a land registry search.

The proposal route under Section 5 can be faster than waiting for a tender. However, its availability depends on the policy of the government, and an investor should confirm that the route is open before preparing a proposal.

The 50-year term and the extension to 99 years were both introduced by amendment and not by the original act. The current fee should be confirmed before a lessee commits to an extension.

For a lender, the security is a mortgage over leasehold rights which depend on the lessee's continued compliance with the lease. Payment of land rent and compliance with the construction period should be monitored for the life of the loan.

Sub-leasing, transfer of management and assignment of leasehold rights all require the consent of the Ministry of Tourism. The time needed to obtain that consent should be built into the timetable of any resort acquisition.

For more information, please contact:

Mr. Ahmed Murad, Senior Partner

Email: [email protected]