The Maldives Government has on 8th October 2023 introduced a new regulation governing the various aspects of integrated tourist resorts developed and operated on islands and tourism zones throughout the country. The ‘Regulation on the Development and Operation of Integrated Tourist Resorts’ (Regulation No: R-163/2023) (“Regulation” or New Regulation”) is issued by the Ministry of Tourism (“MoT”) pursuant to Section 16-1(c) of the ‘Maldives Tourism Act’ (Law No: 2/99) and repeals the 2021 regulation on integrated tourist resorts (“2021 Regulation”). The New Regulation came into force on 8th October 2023 and governs similar areas with respect to the integrated tourist resort concept with some modifications.
Acquisition of the Property
The Regulation allows for 4 methods in which Islands, lagoons, and lands (“Properties”) can be acquired by private investors for the development of an Integrated Resort under a long-term lease directly through the MoT or via a state-owned company:
- Open bidding, in which investors may acquire a Property through a public tender process announced by MoT. The requirements of which require the payment of a lease acquisition cost and submission of documents to prove the financial capacity to invest 20% of the required minimum investment amount;
- Closed bidding, in which investors may acquire a Property through submission of an unsolicited proposal to MoT outlining an investors plan to develop such property in accordance with the ‘Regulation on the Submission of Proposals for the Leasing of Islands, Lands and Lagoons for Tourism Purposes’ (Regulations No: R-69/2016);
- Cross subsidization, in which investors may acquire a Property from MoT provided they agree to invest in a large-scale socio-economic infrastructure project in accordance with the public announcement made in respect of such projects; or
- Lease through a 100% state owned company in connection to a tourism real estate development project.
The Regulation also caters to the conversion of existing tourist resorts to an Integrated Resort and prescribed the rules and procedures for such conversion.
Categories of Tourist Properties and Establishments
The New Regulation defines an ‘integrated tourist resort’ (“Integrated Resort”) as a concept which can be developed on a single island entirely, part of an island or several islands as a whole consisting of the operation of:
- Tourist properties, consisting of tourist resorts, resort hotels, hotels, and yacht marinas; and
- Tourist establishments and service outlets consisting of dive centers, restaurants, retail shops and similar types of outlets catering to tourists.
The New Regulation has removed tourist guest houses from this definition thereby indicating that properties developed to the standards of a tourist guest house can no longer be developed within the Integrated Resort concept.
The Regulation prescribes minimum standards for the development of the various types of tourist properties and establishments. Whilst it is the responsibility of the resort’s developer to designate plots within the Integrated Resort for the various categories of properties and establishments and notify MoT of the same. Similarly, service outlets catering to tourists are to be located within plots designated for business purposes. Additionally, the Regulation prescribes the fundamental utility services which must be established on the Integrated Resort. These are electricity, telecommunications, internet, water, sewerage services and waste management services in accordance with the established utility standards as well as health services in accordance with ‘Health Services Act’ (Law No: 29/2015).
Granting of Rights to Third Parties
Where the leaseholder of an Integrated Resort wishes to sell, transfer, or sublease the entirety of its rights under the lease agreement to a third party, they can do so provided they comply with the Regulation to be formulated by MoT. However, where a sublease has been granted over the entire leasehold rights, the sublease holder is restricted from granting a further sublease over the entire sub leasehold rights to a third party.
Alternatively, where the developer or sublease holder of an Integrated Resort wishes to sell, transfer, sublease or grant management rights to various third parties in respect of the separate plots contained within the Integrated Resort for the operation of various categories of tourist properties, establishments and service outlets, they can do so provided they comply with the rules prescribed under the ‘Regulation on the Grant of Rights’ (Regulation No: R-14/2010) (“Grant of Rights Regulation”). Separate rooms or villas to be developed on the Integrated Resort may also be leased on a long-term strata basis to private investors in accordance with the prescribed rules on tourism strata leases.
Where plots are granted to third parties for the operation of various categories of tourist properties or establishments, the Regulation requires the developer or sub leaseholder to enter into a sublease agreement with such third parties to govern aspects of their commercial arrangement and prescribes certain terms to be contained in such agreement. These terms are, the sublease duration and rent; covenant that it shall be the developer (head leaseholder) that shall bear the obligation to pay the head lease rental to the government; procedures on breaches of any terms contained; a term that guaranteeing that the terms of the head lease agreement shall take precedence over the terms of the sublease agreement; procedures on strata leasing of separate rooms or villas on a long term basis; and an annex including the approved chart which identifies the plot being subleased. Sub leaseholders of individual tourist properties or establishments may grant management rights to a third party as well provided it is done as per the rules prescribed under the Grant of Rights Regulation.
Similarly, where plots are granted to tourism service providers for the operation of various service outlets, the Regulation requires the developer and service provider to enter into a management agreement to govern the fundamental and common services to be provided in such outlets. These terms are to address the fees to be charged for the provision of such services. This management agreement is to be registered with MoT.
Regulatory Processes
MoT’s approval is required for the operation of an Integrated Resort including approval for the separate tourist properties and establishments to be operated within the resort itself. Additionally, approval from the relevant government agency will be required for the operation of various types of service outlets within the resort as well.
The license for the operation of an Integrated Resort is issued for a period of 20 years or where the duration of the remaining head lease period is less than 20 years, for the period of the remaining head lease. The application process requires parties to file the prescribed application form to MoT along with the supporting documents consisting of a chart demarcating the individual plots for sublease and where the Property is located on an uninhabited island, copies of registered utility service establishments consisting of the power house, desalination plant, sewage treatment plant and health service center.
Penalties for Non-Compliance
Lastly, the Regulation grants MoT the authority to impose financial penalties for non-compliance on the following matters:
- A sum not exceeding MVR 100,000.00 (equivalent to US$ 6,485.08) for non-compliance of the prescribed rules under the Regulation; and
- A sum not exceeding MVR 1,000,000.00 (equivalent to US$ 64,850.84) for non-compliance of the prescribed service standards for services provided within the integrated Resort.
