Published on and written by Cyril Jarnias
Beyond the postcard image, the Maldives is transforming into an open-air laboratory for the city of the future. Population pressure in the Malé region, extreme vulnerability to sea level rise, a housing crisis, dependence on tourism, and massive debt: all these challenges are converging today in a series of urban projects of unprecedented scale. Between mega-land reclamation projects, floating neighborhoods, an urban planning framework law, giant bridges, and new sustainable “townships,” the archipelago is rapidly redrawing its urban geography.
A New Legal Framework to Manage the Urbanization Rush
As construction sites multiply, the executive branch started by locking down the legal framework for urbanization. Two foundational texts were approved by President Dr. Mohamed Muizzu: the Urban Planning and Management Act and a 13th amendment to the Decentralization Act, soon to be complemented by a specific Urban Development Act.
The new laws establish a national system for infrastructure planning and land use, aiming to maximize the socio-economic benefits of each plot sustainably. Policy is now defined by the President and his cabinet. The Ministry of Housing, Land and Urban Development provides technical oversight, assisted by local councils and industrial zone agencies.
All development operations must obtain a permit and comply with national standards. Local plans are no longer developed autonomously: they must align with an “Island Development Master Plan” or a “City Development Master Plan” integrated into a national Physical Development Plan, as stipulated by the new legislative arsenal.
The new laws, by transferring control of local urban plans and policy definition to the presidential level, are raising concerns. Critics argue they could reduce local councils to mere administrative relays of the central government and diminish resident participation in planning decisions, contradicting the decentralization goal central to previous governance reforms.
A National Strategy: Decongesting Malé and Structuring Regional Hubs
Behind these texts lies a much broader strategy, already outlined in the National Spatial Plan 2020–2040 and the Strategic Action Plan 2019–2023: moving away from the unsustainable “all-Malé” model. The capital, Malé, hosts about 40% of the population on less than 2 km², with prohibitive rents and extreme overcrowding. Over 70% of residents in the Malé region are tenants, often forced to share cramped housing.
To reduce demographic and economic pressure on Malé, the government is banking on two levers: massive housing construction and land reclamation in the Greater Malé region (Hulhumalé, Gulhifalhu, Rasmale’, Giraavaru Falhu, Uthuru Thila Falhu), and the creation of regional urban hubs aiming to decentralize economic activity and public services.
Seven islands have thus been designated as “urban centers” under a sustainable regional development policy: R. Ungoofaru, B. Eydhafushi, Lh. Naifaru, ADh. Mahibadhoo, F. Nilandhoo, Dh. Kudahuvadhoo, and L. Fonadhoo. These islands are to be prioritized for infrastructure, public services, and economic investments, to serve clusters of atolls in the country’s north and south.
Two major integrated development zones structure the Maldives’ long-term planning.
All this unfolds in a tense macroeconomic context: public debt reached 123% of GDP in 2023, with the state listed among countries at high risk of debt distress. The social housing sector already accounts for nearly $1 billion in guaranteed debt, over half of it held by the Housing Development Corporation (HDC).
Hulhumalé: From “City of Hope” to Financial Capital and Smart City
The absolute symbol of this urban push, Hulhumalé is an artificial island conceived in the late 1990s as the “City of Hope.” Elevated about 2 meters above sea level, it is ultimately intended to host up to 350,000 people, nearly the country’s entire current population.
Phase 1 (about 160 ha) was completed in 2002 and already houses nearly 50,000 residents, with a target of 80,000. Phase 2 (244 ha) was delivered in 2015 and continues its urbanization. Development is managed by the Housing Development Corporation, rebranded Urbanco for its metropolitan functions. The island is connected to Malé and the international airport by the Sinamalé Bridge, financed under China’s Belt and Road Initiative.
A Strategic Phase III to House the Urban Middle Class
The next major milestone is Phase III, a 63-hectare land reclamation project intended to alleviate the housing shortage in the Malé region. The contract, worth an estimated $268 million (nearly MVR 3.9 billion), was awarded to the Sri Lankan company Capital Marine and Civil Construction (CMC). Boskalis provides the dredging equipment, with vessels of 22,000 m³ capacity, including the famous Willem van Oranje and Prins der Nederlanden.
The work has experienced several suspensions, notably for a masterplan revision and following an injunction from the Environmental Protection Agency during a coral bleaching period. After these interruptions, activities resumed, sometimes mobilizing two large dredgers simultaneously. According to the latest updates, between 23 and 40 hectares have already been reclaimed, representing up to about 63% project completion.
Ultimately, this new area will host residential zones, industrial areas, and a marina. The government plans to distribute plots there to Malé residents, continuing land redistribution programs intended to benefit over 19,000 people, including 1,400 plots from this Phase III.
Below is a summary table of the main land reclamation projects in Greater Malé, based on available data:
| Project / Area | Reclaimed or Planned Area (hectares) | Primary Intended Use |
|---|---|---|
| Hulhumalé – Phase I | ~192 (mentioned in a total) | Residential, services, commerce |
| Hulhumalé – Phase II | 244 | Residential, tourism, urban core |
| Hulhumalé – Phase III | 63 | Housing, industry, marina |
| Gulhifalhu – Phases I & II | 192 | Port, housing, logistics activities |
| Gulhifalhu – Phase III | 85 | Housing (mainly), commerce |
| Giraavaru Falhu | 160 (incl. ~60 already reclaimed) | Integrated urban development |
| Uthuru Thila Falhu | 200 | Strategic industrial zone |
| Rasmale’ (Fushidhiggaru Falhu) | 1,009 | Eco-city, housing for ~65,000 residents |
In total, over 1,600 hectares are being created or planned in five large lagoon pockets around Malé – equivalent to increasing the archipelago’s land area by nearly 5% (estimated at about 298 km²).
A Smart City, a Real-World Test
Hulhumalé is also the testing ground for an ambitious smart city project. Under the SmartCom brand, Urbanco has deployed an open-access fiber optic network (GPON) covering the city, allowing multiple operators (Dhiraagu, Ooredoo, Medianet, ROL) to offer services on the same infrastructure. Over 12,000 subscriptions are already connected, particularly in the massive Hiyaa social housing projects, apartments of the utility company STELCO, or those of the airport authority.
Key initiatives for building Asia’s first 100% gigabit smart city, in collaboration with Huawei Lanka and Calix.
Deployment of an IT park and connected urban services for a smart and efficient city.
Creation of dedicated zones for entrepreneurs to foster economic and technological development.
Implementation of electric mobility and a street grid with dedicated lanes for bikes, buses, and cars.
Installation of low-energy street lights and connected benches to improve the living environment.
To steer this transformation, HDC developed with support from UNDP and CHÔRA a 2025–2030 strategy focused on three pillars: adaptive urban planning, economic diversification (renewable energy, digital services), and good governance. Tools like ERP systems, cost recovery models, and multi-year urban service plans aim to improve daily management, while governance reforms focus on transparency, independent audits, and formal user feedback mechanisms.
Measuring Quality of Life: The “Liveability” Index
In 2023, a “liveability” index was launched for Hulhumalé by HDC and UNDP to precisely measure residents’ lived experience. It is based on five dimensions – good governance, economic sustainability, environmental sustainability, social inclusion, and technological innovation – and combines administrative data with citizen perceptions (over 500 survey responses). The tool, accessible on an interactive platform, is already used to adjust certain priorities, particularly on essential services like waste management, maintenance, and energy, where gaps were identified.
The government now aims to make Hulhumalé the country’s financial capital, complementing Malé which would retain the administrative role. At full capacity, the urban complex would create over 90,000 additional jobs, bringing job opportunities in the area to nearly 224,000.
Government of the Maldives
Gulhifalhu: From Contested Port Island to Future Residential Town
A few kilometers from the capital, Gulhifalhu embodies the extreme tensions between logistical imperatives, housing needs, and environmental preservation. This artificial island, located in the Kaafu atoll between Villimalé and Thilafushi, was designated as a district of Malé City and was initially intended to host a new high-capacity commercial port.
The objectives were multiple: relieving the saturated Malé Commercial Harbour, absorbing increased traffic from tourism and population growth, freeing up land in the city center to improve living conditions, and developing a logistics hub integrating warehouses, light industries, and distribution. A major housing component – dubbed “Villimalé 2” or a mega-housing project – was also intended to ease real estate pressure.
A Record Reclamation Project and XL Port Capacity
The Gulhifalhu reclamation proceeded in phases. Phase 1, completed in March 2021, created 42 hectares by depositing 6.5 million m³ of sand. Phase 2, entrusted to the Dutch company Boskalis, added 150 hectares by dredging 18 million m³, for a cumulative area of 192 hectares completed in spring 2024. A Phase 3 plans an additional 85 hectares, primarily for residential use, for a total of 277 hectares in some overall reclamation summaries.
Amount in dollars of the loan provided by the Exim Bank of India to support the port project.
Environment, Justice, and Urban Planning: The Gulhifalhu Controversy
The environmental cost of the operation is considerable. The reclamation destroyed a protected marine area – the Hans Hass Place reef (Kiki Reef) – and affected about thirty dive sites. Environmental impact assessments, complemented by a social study, documented risks of irreversible damage to coral reefs, massive sedimentation, greenhouse gas emissions from dredging, coastal erosion, and reduced climate resilience.
Despite several environmental measures, the project is criticized for an insufficient consultation process. The public consultation for the impact study lasted only five days during the pandemic and the report was only in English. A lawsuit and a corruption investigation have also questioned the contract awards.
On the social front, critics target the density plan: over 41,000 units for 150,000 residents are mentioned, with green spaces reduced to 0.85 m² per person and school facilities deemed insufficient. Concerns also focus on possible effects on local fishing and tourism.
Repurposing: The Port Goes to Thilafushi, Gulhifalhu to Become Largely Residential
Facing controversy and shifting priorities, the executive decided to locate the main container port on Thilafushi island, already dedicated to industrial activities, waste treatment, and utilities. Gulhifalhu should thus be largely reserved for housing, while retaining a mixed role with commercial spaces.
According to available data, 3,640 plots have already been allocated, over 2,000 under the government’s “Binnveriya” program. Some plots initially planned for Giraavaru may be reallocated to Gulhifalhu. A project awarded to the Chinese company CMEC plans to equip the island with roads and networks (water, electricity, sanitation), but this project is already delayed in the study phase.
Rasmale’, Giraavaru Falhu, Uthuru Thila Falhu: A Polycentric Greater Malé
Around Malé, a constellation of new towns is emerging in lagoons once free of major development. Rasmale’ is the flagship: built on the vast Fushidhiggaru lagoon (over 1,000 hectares reclaimed), it is to become an “eco-city” designed for 65,000 residents, with a focus on renewable energy, modern transport, and urban compactness.
Over 1,600 hectares of land are being reclaimed from the sea in Greater Malé to address the land crisis.
This constellation of towns and industrial zones is intended to function as an integrated system, connected by a network of bridges and public transport, particularly the Greater Malé Connectivity Project (GMCP), often presented as the largest infrastructure project in the country’s history.
Bridges and Mega-Infrastructure: Re-stitching the Urban Archipelago
The Maldivian urban strategy is inseparable from a massive push on transport infrastructure. The GMCP – or Thilamalé Bridge – is at the heart of this transformation. Stretching 6.7 km, it is to connect Malé, Villimalé, Gulhifalhu, and Thilafushi. Financed to the tune of $500 million by India (Exim Bank credit and grants), it had already consumed over MVR 792 million of planned investments in 2023 and is over 50% complete as of 2025, with completion announced for 2026.
The country is investing heavily in airport modernization. Velana International Airport (VIA) is undergoing a major expansion (new terminal, runway, fuel farm, doubled cargo capacity) for about $1 billion. Furthermore, Hanimaadhoo Airport is being transformed into a regional hub and Addu Airport is having its infrastructure renovated.
Another bridge, the Hankede Bridge (1.4 km), already connects several islands in Addu City, also financed by an Indian line of credit of about $800 million covering several projects. In Greater Malé, an enhanced public bus network, as well as a “Greater Malé Land Transport Network” project with reliable minibuses, aims to streamline travel across Malé, Hulhulé, and Hulhumalé.
Finally, the creation of an integrated transport system between Rasmale’, Giraavaru Falhu, and Gulhifalhu, led by the Ministry of Transport and MTCC, illustrates the drive to link these new hubs and avoid replicating the pattern of a saturated megacity.
The Major Housing Offensive: Between Social Ambition and Budgetary Risk
For over a decade, the Maldivian state has become the country’s leading real estate developer. A large-scale social housing strategy was implemented as early as 2009, then consolidated in the Strategic Action Plan 2019–2023, which notably planned 20,000 new social housing units, MVR 1 billion for the Gedhoruveriya loan program, and a law on leases and condominiums.
Today, over 13,000 units have been built in Hulhumalé under these programs, notably Hiyaa, a massive high-rise complex. Reduced-interest loans (5%) were offered through the Hiyaavehi Financing Programme for individual construction, with ceilings ranging from MVR 1 million in the atolls to MVR 6 million in Greater Malé.
A New National Project for Housing Affordability and Accessibility
In 2025, the government validated a National Housing Affordability and Accessibility Project, aimed at stabilizing and making the housing market more accessible. The key idea: rely more on private capital, while directing production towards affordable housing. Specific concessions will be granted to developers who build cost-controlled housing at their own expense. The state also commits to purchasing a portion of the units produced to allocate them to eligible households based on criteria.
Percentage of their loan portfolio that commercial banks must dedicate to the affordable housing fund in Malé.
The 2025 budget illustrates this priority: MVR 1.5 billion is earmarked for housing, MVR 4 billion is mobilized for a 5% interest credit program for homeownership, while MVR 12.4 billion fuels the Public Sector Investment Programme (PSIP) to correct service gaps between Malé and other islands.
A Worn-Out Model
But the scale of public intervention is beginning to threaten financial sustainability. According to available figures, about $1 billion in guaranteed external debt is linked to social housing programs, nearly 19% of GDP in 2020. The Hiyaa project alone represents a total cost of about MVR 10.5 billion ($679 million), or nearly MVR 1.6 million per unit, with an estimated public subsidy per apartment of $31,800.
The model has major structural flaws: over half of the contracts in Hulhumalé are non-performing, recovery procedures and evictions are lax, and state acts of clemency are multiplying. The targeting of beneficiaries, based on socio-professional categories rather than a means test, favors allocation capture by the middle or upper classes. Furthermore, illegal subletting of units at market rates is widespread.
Quality issues add to this: insufficient standardization of designs, maintenance failures, incomplete urban infrastructure, which fuel resident frustration. Finally, the public sector accounted for nearly 74% of the housing stock produced in 2020, which tends to crowd out private initiative, already handicapped by land cost, dependence on imported materials and labor, and an underdeveloped mortgage market.
Towards a Systemic Housing Reform
To correct course, the government and the World Bank launched, under the Maldives Urban Development and Resilience Project (MUDRP), a comprehensive study to reform housing policies. A three-part market survey is underway to analyze private sector perceptions, those of the general public, and test the acceptability of different reform scenarios.
The current title registration process for condominiums takes this many years, which they aim to reduce to six months.
Key institutional players – Ministry of Construction, Housing and Infrastructure, Ministry of Finance and Planning, HDC, Fahi Dhiriulhun Corporation, Statistics Bureau, NGOs, the national university – are involved in this effort, with technical support from the World Bank. The stakes are high: in the Malé region, only the wealthiest 20% can currently hope to become homeowners, in a market where the cheapest housing starts at around MVR 1.8 million (about $120,000).
From Floating Cities to “Sustainable Townships”: Diversifying Urban Forms
Alongside massive land reclamation, the Maldives are exploring more experimental concepts, starting with the Maldives Floating City. Conceived as the world’s first true floating island city, it is to develop across 200 hectares of lagoon, a ten-minute boat ride from Malé and the international airport. The urban plan, inspired by brain coral structures, envisions some 5,000 residential units of 100 m², several thousand homes, along with hotels, restaurants, shops, a marina, a hospital, a school, and government buildings.
Spearheaded by the firm Waterstudio and developer Dutch Docklands, this public-private project aims to create a car-free community for 20,000 residents, favoring walking, cycling, canals, and electric scooters. Using Dutch flotation technology, it received government approval in 2022 after payment of a $1 million permit fee. A pilot island of houses is already visible, with full completion expected in four to five years.
Beyond engineering, the success of such a “city on water” depends on establishing a legal framework for floating real estate ownership, a smart energy grid, integrated waste management systems, safety guarantees against storms, and community design that goes beyond the image of a mere tourist showcase.
The government is preparing the development of ‘Sustainable Townships’, large integrated urban complexes combining tourist accommodation, residential, health, education, and renewable energy. To benefit from a 5% income tax rate for ten years (then 10%), projects must represent an investment over $500 million and must include educational institutions, health infrastructure, food security measures, and green energy projects. An adaptation of the special economic zones law will provide the legal framework.
The idea is to diversify the tourism model, attracting long-term investors, permanent residents, digital nomads, and visitors interested in wellness, medical, or educational tourism. Several projects listed in investment portfolios – university campuses, specialized hospitals, high-value agriculture, leisure parks – fit this logic.
Climate Resilience, Green Finance, and Governance: The Fault Lines
With over 80% of its land less than one meter above sea level, the archipelago remains one of the countries most exposed to climate change, coastal erosion, and flooding. UN reports and World Bank analyses estimate that economic damages from coastal flooding could reach up to 11% of GDP by 2050 under high-emission scenarios. Already, over 80% of islands experience erosion, with nearly 30 considered critical.
Value in millions of dollars of the coastal protection service provided annually by the Maldives’ reef barrier.
Several major programs seek to reconcile this accelerated urbanization with softer adaptation solutions. The Asian Development Bank, for example, is funding a project to strengthen climate resilience and food security (nearly $22 million), including upgrading early warning systems in Malé and Addu, mangrove restoration, constructing stormwater drainage systems in Kulhudhuffushi, and deploying hybrid coastal protection infrastructure (artificial reefs, berms, groynes).
Another project, “Building Climate Resilient Safer Islands”, supported by the Green Climate Fund and JICA with over $25 million in GCF grants and over $40 million in co-financing, aims to institutionalize integrated coastal zone management (ICZM), develop climate data and warning systems, and promote nature-based solutions for beach and reef defense.
Concurrently, the World Bank’s climate development report (CCDR) recommends mobilizing new financing instruments: a “Climate Finance Hub,” a national carbon market, better-regulated public-private partnerships, a gradual phase-out of fossil fuel subsidies, and requirements for resorts to increase renewable energy use.
World Bank Climate-Development Report (CCDR)
However, this entire project and financing architecture collides with the question of governance. The UN-supported Sustainable Development Goals roadmap for the Maldives highlights the need to consolidate decentralization, clarify the legal frameworks for local councils, and increase their financial resources. Experiences like the Open Government Action Plan of Fuvahmulah City (environmental advocacy group, citizen engagement portal, public procurement transparency) show on a micro scale how municipalities are trying to take ownership of these issues.
It is this permanent tension – between centralization and local autonomy, urban growth and ecological limits, large loans and budgetary sustainability – that will determine whether the projects currently on the table will make the Maldives an archipelago of resilient cities… or a laboratory for experiments too costly for such a fragile state.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
