Legal Framework for Real Estate Investment in Mozambique

Navigating the Legal Framework for Real Estate Investment in Mozambique: A Comprehensive Guide

The country's property market is projected to reach US$425.89 billion in value by 2025, driven largely by residential and commercial segments. However, investing in Mozambican real estate requires a deep understanding of its unique legal framework, which emphasizes state ownership of land while providing avenues for secure usage rights. This article delves into the historical context, key laws, processes for foreigners, and current challenges and opportunities, building on the foundational principles of land tenure and investment incentives.

Historical Background of Land Ownership Laws

Mozambique's land laws have evolved significantly since colonial times, reflecting shifts in political ideology and economic priorities. During Portuguese colonial rule (ending in 1975), land was treated as a commodity, with large plantations controlled by settlers, often displacing indigenous communities. Post-independence, the socialist FRELIMO government nationalized all land under the 1975 Constitution, vesting ownership in the state to prevent exploitation and promote equitable access.

The pivotal 1997 Land Law (Lei de Terras) marked a progressive reform, recognizing customary land rights held by local communities while introducing the Direito de Uso e Aproveitamento da Terra (DUAT), or Right to Use and Benefit from Land. This law balanced state control with private and communal usage, allowing DUATs to be granted for up to 50 years (renewable) without outright ownership. Influenced by post-civil war reconciliation (1992), it aimed to empower rural communities and attract foreign investment. Subsequent amendments, including the 2004 Family Law ensuring women's land rights, and ongoing revisions, have addressed gaps in implementation, such as bureaucratic delays and conflicts over customary vs. formal rights. Today, under Article 109 of the 2004 Constitution (revised in 2018), all land remains state-owned, but DUATs provide heritable and transferable usage rights, forming the bedrock of real estate investment.

Land Ownership and DUAT: Key Principles and Processes

A cornerstone of Mozambique's property law is the principle that all land is state-owned and cannot be bought, sold, or mortgaged outright. 

This stems from the socialist legacy, ensuring land serves public interest rather than private speculation. Instead, investors acquire DUATs, which grant exclusive rights to use, develop, and benefit from land for economic activities, agriculture, or housing. DUATs are renewable for another 50 years upon expiration, and while land itself isn't owned, buildings, improvements, and infrastructure on it can be freely owned, transferred, or sold without restrictions.

For foreigners, obtaining a DUAT involves specific requirements to promote local integration and economic contribution:

• Eligibility: Foreign individuals must have resided in Mozambique for at least five years. Foreign companies need to be registered or incorporated in Mozambique, often requiring an approved investment project under the Investment Law. No minimum or maximum land sizes are mandated, but applicants must submit an exploitation plan detailing intended use.
• Application Process: The process is managed by the National Directorate of Lands and Development (DINAT) or provincial authorities. It begins with a provisional authorization (valid for two years for foreigners), allowing initial surveys and community consultations. Applicants submit documents including identity proof, investment plans, and environmental impact assessments to the Ministry of Land and Environment. Community consultations are mandatory to respect customary rights, followed by cadastral surveys and registration. The entire process can take 6-12 months, though bureaucratic hurdles often extend it.
• Costs and Taxes: Annual land use fees (taxa de autorização) vary by location and size, ranging from 1,000-10,000 meticais per hectare (about US$15-150). Transfer taxes apply to building sales, typically 2-10% of value.

This system protects against land grabs while enabling investment, though critics note challenges in enforcement and overlapping claims.

The Revised Investment Law No. 8/2023: Enhancing Investor Confidence

Enacted on June 9, 2023, and effective from September 2023, Investment Law No. 8/2023 replaces the outdated 1993 law, aiming to streamline processes and attract foreign direct investment (FDI) amid Mozambique's economic growth. Administered by the Agency for Promotion of Investment and Exports (APIEX), it applies to all private investments, including real estate.

Key features include:

• Guarantees and Incentives: Investors receive protections against expropriation (except for public interest with fair compensation), free repatriation of profits, and dispute resolution via arbitration. Tax incentives, such as customs duty exemptions on equipment imports and reduced corporate income tax (from 32% to 10-20% for qualifying projects), are available for up to 10 years.
• Investment Regimes: Projects over US$500,000 qualify for special regimes, including accelerated DUAT approvals and visa facilitations. The law emphasizes sustainable development, requiring environmental compliance.
• Changes from Previous Law: It introduces clearer procedures for project approval (within 15-30 days), digital submissions, and penalties for non-compliance. Regulations issued in March 2024 detail implementation, including FDI screening for strategic sectors.

This law has boosted FDI, with real estate benefiting from linked infrastructure projects.

Other Relevant Legal Aspects

Beyond land and investment laws, real estate transactions involve:

• Property Registration: Managed by the National Directorate of Registries and Notaries; mandatory for transfers, with fees around 1-2% of value.
• Taxes: Property transfer tax (SISA) at 2% for residents (10% for non-residents), annual property tax (IPRA) at 0.4-1%, and VAT on commercial leases at 16%.
• Environmental and Zoning Laws: Compliance with the 1997 Environment Law is required for developments.

Challenges and Opportunities in 2025

Despite a promising framework, challenges persist. Political instability, including post-election unrest and insurgency in Cabo Delgado, poses security risks and disrupts planning. Bureaucratic delays in DUAT approvals, high transaction costs (5-10%), and limited financing (mortgage rates at 19-24%) hinder accessibility. Natural disasters and weak infrastructure further impact rural investments.

Opportunities abound, however. The market is set for moderate growth in 2025, fueled by LNG projects (e.g., Rovuma LNG), infrastructure like new highways, and tourism. Affordable housing demand is high, with mixed-use developments offering yields of 2-3%. Commercial real estate, valued at US$33.13 billion in 2025, benefits from urban migration. Trends include sustainable buildings and digital transactions, aligning with global shifts.

summary

Mozambique's legal framework for real estate investment, anchored in state land ownership and progressive reforms like DUAT and Investment Law No. 8/2023, offers a balanced path for growth while safeguarding public interests. For investors, thorough due diligence—including legal consultations and community engagement—is essential to navigate complexities. As the nation stabilizes and LNG revenues flow, 2025 could mark a turning point, transforming challenges into lucrative opportunities. Prospective investors should consult APIEX or legal experts for tailored advice.