Common Mistakes When Buying Real Estate in the Maldives

Published on January 17, 2026 and written by Cyril Jarnias

Buying real estate in the Maldives is a dream for many: overwater villas, private islands, luxury residences in the heart of a turquoise lagoon. But behind the postcard images lies a very particular legal and financial environment. For a foreign investor, the slightest oversight can turn into a serious and costly problem: an invalid contract, overly limited rights, an inability to resell or transfer the property, underestimated fees, or total dependence on a struggling operator.

Failing to understand that in the Maldives, foreigners (practically) cannot own freehold property

The first misunderstanding, and arguably the most dangerous, is believing one can buy an island or a villa “in full ownership” as in Europe or North America. The Maldivian Constitution is clear: land ownership is reserved for Maldivian citizens. Foreigners cannot hold land under freehold title.

Failing to grasp this reality leads to several chain reactions of errors: overestimating the long-term value of the asset, ignoring that the value decreases as the remaining lease term shrinks, or wrongly believing that transferring the property “like a classic ownership” will be simple.

A central point is often forgotten: the government remains the ultimate owner of the land. The investor’s right of enjoyment is legally tied to the master lease held by a developer or operator. If this master lease is poorly drafted, non-compliant, or expires without renewal, the small investor’s rights mechanically collapse.

Underestimating the complexity of the legal framework and authorizations

The Maldivian legal system is a blend of civil law, common law, and Islamic law (Sharia). This hybrid nature is reflected in the rules governing property, inheritance, contracts, and foreign investment. Believing that practices will be identical to those of an Anglo-Saxon or European country is a common mistake.

Several texts apply to foreign real estate investments: the Foreign Investment Act (in its revised 2024 version), the Tourism Act for tourism projects, the Special Economic Zones Act for certain large projects, the Land Act for land matters, not forgetting Foreign Direct Investment (FDI) policies and sectoral regulations (integrated tourism, special zones, etc.).

An often overlooked element is the influence of Islamic law on matters of inheritance and succession. The rules governing the devolution of property rights and shares can differ significantly from Western practices. Not having these consequences explained by a local lawyer can block an inheritance or seriously complicate transferring the asset to heirs.

Confusing “private island for sale” with actual transferable ownership rights

International listings regularly mention “private islands for sale” in the Maldives. Many buyers infer that they will become owners of the island itself. In reality, it is almost always about concessions, long-term leases, or share transfers in a company holding a master lease with the state.

The mistake lies in not analyzing precisely what is being purchased: land, buildings, shares in a holding company, a stake in an existing lease, or a simple contractual right of use. Not dissecting the legal structure is like buying blind.

Therefore, any promise of “full ownership” of an island must be read in light of Maldivian law. It is not the commercial slogan that matters, but the title of the right in the official documents: 50 or 99-year lease, concession, strata title, management agreement, etc.

Neglecting to verify the master lease and titles

On the ground, many projects for foreigners are based on a cascading structure: the state grants a developer or local company a master lease on an island or plot; this leaseholder then sells units to individual investors through sub-leases or sectional ownership.

One of the most frequent mistakes is focusing solely on the sale contract for the villa or apartment, without requesting to see or analyze the master lease. Yet, the investor’s rights are entirely conditional on the terms and validity of this master lease: duration, renewal conditions, environmental obligations, government lease rent, penalties for non-compliance, etc.

A basic check should include: verification with the Land Registry and relevant ministries, confirmation of the absence of disputes or sanctions, analysis of the chain of ownership over several decades to detect irregular transfers, loans, or encumbrances. Accepting as sole proof an approximate plan or a hand-drawn map, without a recent GPS survey or official validation, is another mistake that fuels boundary or area disputes.

Ignoring usage constraints: these are not (always) private residences in the classic sense

Another frequent misunderstanding: assuming one is buying a vacation home that can be freely occupied year-round, invite whomever they want, rent freely on platforms of their choice, or convert into a primary residence. In the Maldives, a large portion of properties accessible to foreigners are integrated into regulated tourism projects.

Not carefully reading the condominium regulations, the hotel management contract, and the usage clauses leads to disappointments: inability to live on-site year-round, prohibition on direct subletting, expensive maintenance obligations imposed by the operator, restrictions on pets or renovations.

The Integrated Tourism Model introduced in 2019, which allows mixed projects with a residential component, offers new opportunities but remains subject to tourism and commercial logic. Equating these products to residences “free of any constraints” is a misinterpretation.

Misreading sale, lease, and management contracts

In the Maldives, as elsewhere, the contract is the centerpiece that establishes the rights and obligations of the parties. But the local context adds several specificities: the importance of language (Dhivehi and English), the presence of complex clauses related to tourism, Islamic law, and foreign investment regulations.

The Maldivian Contract Act requires classic elements (offer, acceptance, capacity, consent, consideration). Courts may invalidate or correct certain obvious imbalances, but relying on litigation after the fact is a poor investment strategy. It is far more effective to correct problematic clauses upfront: payment schedule tied to verified construction milestones, penalties for developer delays, mechanisms for reviewing lease rents and management fees based on transparent indices.

Forgetting the real cost of the transaction: taxes, fees, and recurring charges

The focus on the advertised price of the villa or apartment leads many buyers to minimize the impact of additional costs. Yet, in the Maldives, transaction and operating costs can represent between 8% and 12% of the purchase price, sometimes more depending on the project structure.

Then come the recurring costs: annual master lease rent paid to the state or landowner, land tax or specific tourism taxes, hotel management or homeowners’ association fees, maintenance charges for facilities, contributions to infrastructure (desalinated water, electricity, waste treatment). In resorts, reliance on imported services, maritime logistics, and specialized labor drives up the bill.

An investor who budgets only the face value of the property and neglects these recurring cash flows risks discovering, after the fact, that the net profitability is far below the optimistic projections provided by the developer. The international tax environment adds another layer: most countries do not have a double taxation treaty with the Maldives, exposing some investors to cumulative taxation on rental income or capital gains.

Investor Advisory

Comparative example of main acquisition costs

To better visualize the weight of these fees, one can summarize the main items mentioned in reference texts.

Cost Item	Nature	Typical Order of Magnitude*
GST on purchase	Indirect tax	Approx. 6% of acquisition price
Lease registration fees	Government fees	$1,000 to $3,000 USD
Stamp duty	Transfer tax	% of price / lease value
Legal fees	Professional fees	$5,000 to $15,000 USD
Agent commission	Intermediary fees	2 to 5% of price
Technical due diligence fees	Studies, inspections, audits	$1,000 to $5,000 USD
Total transaction cost (range)	Aggregation of all items	8 to 12% of purchase price

– Figures are indicative: each project has its own cost structure.

Blindly trusting the developer or agent without checking their reputation

The Maldives attracts reputable international players, but also much more fragile developers. Relying solely on the commercial brochure or a seller’s pitch is a recurring mistake, particularly for pre-construction projects or on isolated islands.

Real estate behavior studies show that the developer’s reputation is decisive for a large majority of buyers. Yet, in practice, many do not check delivered projects, past delays, or previous disputes. It is essential to review the portfolio of completed projects, visit finished projects if possible, speak to existing owners, and search for court rulings or negative press articles.

The typical mistake is accepting a contract that provides neither an independent escrow account for payments, an external audit of construction progress, nor clear penalties for delays. For an off-plan project, disbursements should be linked to construction milestones certified by a third party, not a fixed calendar left solely to the developer’s discretion.

Underestimating environmental and climate risks

The Maldives are one of the countries most exposed to climate change. Almost all land is less than one meter above sea level, and sea level rise projections by 2100 are concerning. Ignoring this context when buying a coastal property or an island is a fundamental mistake.

The exposure is not just theoretical. Past events like the 2004 tsunami or Cyclone Ockhi in 2017 have already caused flooding, infrastructure destruction, and lasting contamination of freshwater lenses. Many islands have had to resort to rigid protection works (seawalls, breakwaters), sometimes with negative effects on ecosystems and beaches.

A serious due diligence should include at a minimum: review of completed Environmental Impact Assessments, consultation with authorities on known risks (erosion, flooding), verification of project compliance with construction standards and coastal setback rules, incorporation of insurance covering natural disasters.

Neglecting the official procedure, the land registry, and compliance obligations

Once the contract is signed and funds are transferred, some investors consider the transaction complete. This is a very dangerous view in a country where legal security heavily depends on the formal registration of transactions.

In the Maldives, registering the lease or strata right with the official registry (Land Registry) is essential to enforce one’s rights against third parties. Omitting this registration, or letting the developer handle it without follow-up, exposes one to situations where the right is not recognized by authorities, or where a third party can claim a prior right.

Investors seeking to bypass the rules using opaque structures, undeclared local nominees, or non-compliant shell companies take a disproportionate risk. The slightest irregularity can serve as grounds to challenge the entire transaction. Conversely, a transparent structure, approved by the relevant ministries and properly registered, offers much better security.

Misjudging financial risks: currency, financing, taxation

Another common trap is thinking only in dollars or euros without considering the local currency, exchange constraints, and rules for repatriating income. The Maldivian currency, the rufiyaa, is pegged to the dollar, but foreign exchange regulations are evolving, particularly with the entry into force of a new currency law requiring conversion of part of the proceeds into local currency.

Added to this is the difficulty of obtaining local financing. Most foreign buyers finance their acquisitions with cash, as Maldivian banks are reluctant to lend to non-residents for leasehold properties. Some developers offer internal financing, but often with a high initial down payment (30 to 50%) and interest rates higher than those in developed markets.

Summary of main financial risks

To clarify the issues, one can summarize the main financial risks faced by a poorly informed buyer.

Type of Risk	Example Consequence for the Investor
Lease depreciation	Decline in resale value as the remaining term decreases
Currency and exchange	Loss on conversion MVR / USD / home currency
Limited financing	Obligation to finance in cash or via expensive developer credit
Potential double taxation	Taxation in country of residence and in the Maldives
Underestimated costs	Net return lower than commercial projections

Believing resale will be easy and quick

Seduced by the Maldives’ international reputation as a luxury destination, many investors assume they can quickly resell their property if needed. This is a hazardous extrapolation. The resale market for leasehold properties owned by foreigners is significantly narrower than the market for primary residences in major capitals.

In practice, resale periods can be significant, sometimes six to twelve months or more, especially when the unit is located in a niche project or a less known atoll. Not factoring this relative illiquidity into one’s investment strategy is a major error. An investor planning a five-year horizon, without studying the impact of the reduced lease term on resale or the actual depth of the secondary market, risks realizing a loss.

Forgetting that rental income often depends on a manager

Most real estate products offered to foreigners in the Maldives are integrated into resorts, hotels, or complexes managed by an international brand or a local operator. Rental income is usually pooled in a “pool” managed by the operator, who distributes a share to owners after deducting management fees and operating expenses.

It is essential to examine the operator’s financial solidity, their experience in managing similar products, the historical performance on other sites, and the control or reporting mechanisms in place. A contract that gives the operator the power to unilaterally change key conditions, increase management fees without a cap, or restrict owners’ usage is a red flag.

Trying to do everything yourself without a competent local team

Today, it is possible to spot a project in the Maldives, contact an agent, receive a draft contract, and even pay a deposit without leaving one’s home country. This apparent ease leads some investors to treat a complex international purchase like a simple vacation booking. This is a misperception.

Perceiving these fees as an “unnecessary expense” rather than insurance against serious mistakes is another common psychological error. On a multi-million dollar investment, saving a few thousand by reducing due diligence is rarely rational.

Role of key players in a secure purchase

To concretely understand each party’s contribution, one can present them in a synthetic manner.

Player	Main Contribution
Specialized local lawyer	Contract analysis, legal compliance, negotiation
International tax advisor	Optimal structuring, prevention of double taxation
Surveyor / engineer	Boundary verification, construction quality, physical risks
Environmental consultant	Erosion analysis, sea level rise, ecological impact
Experienced real estate agent	Market access, filtering of serious projects
Hotel management consultant	Analysis of revenue models and operating contracts

Poorly structuring the property ownership

Another source of errors stems from the choice of ownership vehicle. Some investors acquire the right in their own name, others via a Maldivian company, sometimes combined with a foreign structure (holding company, trust). Each of these options has consequences for liability, taxation, succession, and compliance.

Furthermore, the structure must anticipate transfer: how to bequeath or transfer the right within an international family? How to avoid double taxation when transferring shares of the holding company? Should one opt for direct ownership or through a wealth-holding company in another jurisdiction? Without expert analysis, the investor discovers too late that their structure complicates succession or increases the tax burden upon exit.

Conclusion: Dream of the Maldives, but invest like a professional

The Maldives offer an exceptional natural and tourist setting, and the country has implemented sophisticated mechanisms to attract foreign investment, notably through long-term leases, branded residence models, integrated projects, and investment residency programs.

Investing intelligently in the Maldives means accepting the complexity and responding with a rigorous approach: systematic checks, local legal advice, careful reading of contracts, conservative assessment of income and valuation, and consideration of climate and regulatory risks. The postcard image should be the starting point of the project, not its sole argument.

In short, the Maldives can be an attractive investment ground for those ready to look beyond the lagoon and treat every step as a professional would: with method, caution, and lucidity.