General information of Maldives
The Republic of Maldives is an island country situated in the Indian Ocean, south of Asia. It covers an area of approximately 90,000 km2, making it one of the most dispersed country in the world in geographic terms.
This country has 1196 coral islands, of which 203 are inhabited, all grouped in a double chain of 26 natural atolls. These are organized into 20 administration atolls and the capital, Malé, the most densely populated city in the world.
The atolls are composed of living coral reefs and bars, located on top of a 960 km submarine network that arises abruptly from the depths of the Indian Ocean.
The Maldives is one of the smaller Asian countries, both in terms of population and size, and holds the record for being the flattest country in the world, with a maximum altitude of only 2 meters Vilingili Island, Addu Atoll.
The Maldives has a tropical climate, with a nearly constant temperature throughout the year. The temperature rarely drops below 25 °C.
The climate of Maldives is determined by two major periods: the "dry" season of winter, from November to March, which is the cooler season, and the summer wet season from May to November, which is characterized by violent winds and increased precipitation. In the intervening periods, mid-April and late November, the weather is very mild and the waters have their maximum clarity.
Reasons to invest in Maldives
The archipelago of the Maldives is the main source of attraction for many tourists around the world. Tourism is the main economic industry in the Maldives, as it plays an important role in income and employment generation in the tertiary sector in the country.
The country's success in tourism, together with its business model, is due to the chromatic richness of its waters and the abundance of underwater life, as evidenced by one of the top destinations for divers in the world. Due to its tropical characteristics and added value of its resorts, it has become a popular destination for luxury tourism.
The Maldives has a stable and transparent legal system. A foreign investment law guarantees the security of foreign and domestic investments.
In addition, the Maldives is socially cohesive, with a homogeneous population that shares a culture, religion and language. A new constitution, which enshrines the separation of powers between the executive, legislative and judicial, is a testament to the stature of the country as a modern and progressive nation.
The enormous potential of marine natural resources and workforce young, energetic and dynamic are strong incentives to invest in the Maldives. The number of foreign companies investing in the Maldives is increasing for the past years and the government aims to attract more foreign investment.
In order to attract more investment, the government of the Maldives is establishing special economic zones and other industrial zones and special incentive packages long-term lease of the land.
The idyllic islands of the Maldives are receiving a lot of attention from wealthy real-estate entrepreneurs, property investment firms told CNBC.
Alan O'Connor, director of luxury real-estate group Debutesq, said he's seen a surge in enquiries for private islands recently, in particular from rich Eastern Europeans. In early December, O'Connor met with a Russian billionaire in London whom he described as possessing "a real passion for the Maldives and keen to develop an exclusive luxury resort to rival the best there is."
Several high-net worth individuals seek to profit from the country's booming tourism industry, including 42-year old Czech billionaire Jiri Smejc who opened the Velaa Private Island resort earlier this year, where luxury villas cost $30,000 a night.
Europe-based Debutesq told CNBC that over $1 billion was invested in the country in the past four years, an increase from recent years. Several of the firm's clients are entrepreneurs from Russia and East Asia, with varied business interests including finance and oil.
Global real estate firm JLL meanwhile has brokered six transactions in the Maldives over the past three years, amounting to half a billion in investment volume, also larger than previous years, with interest primarily from high-net worth Asian and Middle Eastern individuals.
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[Image: The Centara Grand Island Resort & Spa in the Maldives.]
Soo Hon Keong | Getty Images
The Centara Grand Island Resort & Spa in the Maldives.
A gateway resort market
"From an investment perspective, the Maldives is a true gateway resort market, which is accessible to Asia, Europe, and the Middle East," said Nihat Ercan, executive vice president of Asia investment sales at JLL.
The Maldives archipelago lies in the Indian Ocean and is home nearly 1,200 islands, out of which only 290 are inhabited. It's often ranked as one of the world's top holiday destinations. Investors looking to open a hotel business have huge scope for profits, with current supply indicating that the Maldives is anything but a saturated market.
A search on popular travel booking site Agoda reveals only 205 hotel listings across the archipelago, with at least fifteen resorts charging more than $1,000 per night. In contrast, other popular island destinations face oversupply issues: Majorca has around 940 hotels, while Phuket boasts 1,600.
The government has a rule of 'one resort per island,' but Ercan believes there's still plenty of space for the hotel business to grow. The rule benefits resorts since the distance between islands deters guests from travelling, giving resorts the chance to profit heavily from a single tourist, from the cost of daily meals to leisure services, he said.
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Costs of islands
The government remains supportive of foreign ownership, granting investors leases of 50 years and expectations are high for an extension to 99 years.
"The cost involved in obtaining the leasehold can vary, depending on the island's size and proximity to Male International Airport," O'Connor said. An undeveloped island of around 14 acres can cost between $7-8 million if it's under half an hour by sea plane from Male, while something of 30 acres further afield can be picked up for around $12 million, he said.
Typically, investors tend to buy existing operating resorts instead of entering the market by themselves, which the government supports since it doesn't disturb local employment.
"The government prefers to see local partnership formed and taxes from profits paid locally. The local business profit tax (BPT) is relatively low at 15 percent and the administration has further encouraged investment by abolishing import tax on construction materials for the next 3 years," O'Connor said.
Challenges
Despite its reputation as a tiny slice of paradise, the Maldives has experienced its fair share of conflict, including an alleged government coup from 2011 to 2012. During that time, Debutesq said their data showed no influence of the coup hurting sales.
The country also recently recovered from a severe water crisis this month after a fire damaged desalination plants in the capital city. Debutesq said this was unlikely to deter investment since water shortages generally occur in populated areas with low infrastructure investment, whereas modern leisure developments build in an element of funding to put this infrastructure in place.
Nyshka Chandran Reporter, CNBC Asia-Pacific
