Private islands in the Maldives are selling for as little as $5 million, industry experts told Arabian Business.
The Indian Ocean nation, traditionally known for luxury tourism, has opened pathways for foreign investment in island property, but the Maldivian Constitution explicitly prohibits foreigners from freehold ownership, creating a highly structured acquisition process centred around the Ministry of Tourism.
Government application process
All island acquisitions begin with formal applications to the Ministry of Tourism, which functions as the central authority for property leases. Applications require detailed development proposals, environmental impact assessments, and proof of financial capacity.
“The Ministry of Tourism is the one-stop shop for island leases,” explained Mohamed Ali Janah, Chairman of Hotels & Resort Construction and a prominent Maldivian investor. “When you approach the government, they have certain regulations with bands for acquisition costs in different parts of the country.”
The Maldives is divided into 20 administrative atolls, each with its own pricing band structure. Acquisition fees are calculated per hectare, with premium location rates in North and South Malé Atolls reaching several times the cost of more remote regions.
The government releases islands through multiple channels: formal public tenders, direct applications, and investment-linked programmes.
“The government periodically announces islands that are available for lease. They also have cross-subsidy programmes, so you invest in something, and the government compensates you with an island,” Janah said.
Leasehold-only structure
Unlike markets offering freehold ownership, foreign investors in the Maldives must operate within a leasehold framework similar to Singapore’s property model.
“Maldives doesn’t have freehold. All these [projects] are leasehold,” Janah told Arabian Business.
“You get the islands for a 50-year lease at the first instance, and then you can buy another 49 years, so you can go up to 99 years.”
These limitations haven’t deterred UAE-based investors, who typically structure their investments through Maldivian-registered companies. Legal specialists recommend establishing locally incorporated special purpose vehicles (SPVs) to hold the leasehold interests, providing additional regulatory compliance and potential tax advantages.
Financing options remain limited for island acquisitions, with most transactions conducted using cash equity. Some regional banks offer lending for established investors, but typically at conservative loan-to-value ratios of 40-50 per cent rather than the 70-80 per cent common in mature markets.
The $5 million entry barrier
While island ownership is traditionally associated with billionaires, the Maldives market offers lower entry points than many assume.
“In terms of entry-level, we could get you an island for like $5 million,” said Ainsley Duncombe, Founder of Off Market Listing Dubai, who markets exclusive islands to wealthy clients.
This represents merely the acquisition cost for smaller, undeveloped islands in less accessible locations. Industry sources indicate that islands in premium locations typically command $15-20 million before any development begins.
The approval process typically takes 12-18 months from initial application to final lease agreement, requiring patience from investors accustomed to faster transaction timelines in other markets.
Environmental regulations
All development proposals must comply with strict environmental regulations, including mandatory environmental impact assessments administered by the Maldives Environmental Protection Agency.
These assessments evaluate potential effects on coral reefs, marine life, and island ecosystems. Projects that fail to meet environmental standards face rejection regardless of investment scale.
Recent regulatory changes require all new developments to include sustainable energy components, waste management solutions, and climate adaptation measures.
Development economics
The island acquisition cost typically represents just 15-25 per cent of the total investment required, with development expenses forming the bulk of the financial commitment.
Marine engineering work presents the first major expense, with costs ranging from $2-5 million depending on the island’s natural condition and protection requirements.
“The first thing before we can move a break, we need to make the wave current become friendly,” explained Imran Farooq, CEO of Samana Developers.
“That’s a 120-day exercise, costs a big bill, but once that is done, the maintenance will be after 10-15 years.”
Development budgets for luxury resorts typically range from $1-2 million per key (industry terminology for a lettable unit). A boutique 50-villa island resort might therefore require $50-100 million in construction costs beyond the island acquisition and marine engineering work.
Construction logistics compound these expenses, as all materials must be transported to the island by boat or barge, adding 20-30 per cent to building costs compared to mainland construction.
Climate engineering requirements
Rising sea levels present a long-term consideration, with specific elevation requirements now built into the approval process.
“Pessimistic scenarios expect a sea level rise of around one metre by the year 2100, while reclamation work in the Maldives assumes 2 to 2.5 metre elevation over current sea levels,” explained Duncombe.
This elevation standard has become industry practice, with Dutch engineering firms — the same ones involved in Dubai’s Palm Jumeirah — often handling the complex marine works. Approval applications must include detailed plans for coastal protection and erosion management.
“The authorities are extremely strong. They are the people who have supported all the expansions and the marine engineering,” said Janah.
ROI expectations
Despite the substantial investment required, developers cite exceptional returns from operating luxury resorts or selling high-end properties.
“The ROI is one of the best in the world. So you’re looking at 15 to 20 per cent return on your investments,” says Janah.
Industry analysts note these projections rely on aggressive occupancy and rate assumptions, though the Maldives has historically outperformed global luxury hospitality markets. Average daily rates at top resorts frequently exceed $1,000, with ultra-luxury properties commanding $3,000-8,000 per night.
For development yields to reach projected levels, resorts typically need to achieve occupancy rates above 65 per cent at these premium price points. Many properties partner with international luxury hotel operators to access global distribution networks and management expertise.
Alternative investment structures
The introduction of sectional ownership laws has created more accessible entry points for investors unwilling to commit to an entire island.
“Maldives is now transitioning from luxury resorts to luxury real estate,” explained Janah. “For the past couple of years, you could have been hearing that villas are on sale in the Maldives.”
These individual villa units, typically within established resorts, start at approximately $2-3 million for standard water villas, rising to $10-15 million for signature residences in premium locations.
Branded residence projects from companies like Waldorf Astoria, Aman and Soneva offer these ownership options with rental arrangements when owners aren’t in residence. Management fees of 10-15 per cent and participation in rental programmes are standard features of these arrangements.
Gulf investors bullish on Maldives island market
Limited supply and increasing global investor interest have created a competitive market for prime islands. A source involved in recent transactions reported multiple offers for desirable properties, often from UAE, Saudi and Qatar-based investors.
“The appetite to invest in Maldives is very strong,” said Janah. “There is political stability.”
For serious buyers, establishing relationships with well-connected local partners often proves essential to accessing off-market opportunities. Several UAE-based developers have established joint ventures with Maldivian partners to navigate the local business environment.
Despite the substantial investment required and complex regulatory landscape, the unique combination of natural beauty, exclusivity and strong returns continues to attract new investors to the Maldives island market — particularly those already familiar with the development economics of luxury destinations like Dubai.
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