Cambodia is in the middle of a property boom. Commercial, residential, and mixed-use developments are sprouting one after the other in the Kingdom’s urban areas like Phnom Penh, Siem Reap, Sihanoukville, and Battambang.
This phenomenon is being fuelled by massive local and foreign investments.
Seeing the boundless opportunities before them, many wealthy Cambodians who previously have no engagement with Cambodia’s real estate industry have started investing heavily in the sector. The Kingdom has also become a favourite destination for property investors across the globe.
Developers are drawn by a growing economy, political stability, business-friendly laws, and the promise of high returns. Chinese, Japanese, Koreans, Singaporeans, and Thais are among the top real estate investors in Cambodia.
But property investors still face many hurdles when investing in Cambodia. Like in other developing nations, bureaucratic delays are common. There is also the problem of outdated laws regulating investment activity.
Areas for investment
The real estate market in Cambodia has a few key segments:
- The market for residential condos is huge. Currently, most of the supply here is in the middle and high-end of the market. Condos are popular with international investors.
- Boreys, or gated residential communities, tend to be the focus for local buyers. These are often landed properties.
Everyone knows that high risk brings a high reward. Fortunately, Cambodia brings a healthy balance between the two. Here are some key concerns about investing:
- You need to properly structure co-ownership rules. Enforcing leases is something that is possible in Cambodia, but going to court is still a bit of a problem. It is important to structure your co-ownership rules with very detailed information, including checks and balances, to make sure you are not subject to claims. Otherwise, you are inviting the possibility of being sued, and this will not be good for your project or company.
- Shortcuts in the construction permit application are a no-no. Make sure the construction permit application procedures are followed strictly. You also need to have the right support from the start. Otherwise, you will encounter many problems with titling and other matters along the way. For instance, some developers have complained of being unable to title the entire size of their building despite their layout being approved. So-called “gaps” in the process are the most likely culprit. Fixing things when they are already done on paper in Cambodia is quite difficult. Problems can also impact negatively the sales process.
- Timely issuance of titles is important. If buyers want to have a property purchase refinanced by a bank, it is quite important to have a title in hand. Some banks won’t allow refinancing without a title. For certain developments, it can take two or three to have a title issued. You buy the house, the house is already there, but you don’t have your title in hand. As a developer, you want to make sure that you can issue a title on time so your clients will not be in default of payment.
- You need to have internal regulations in place before sales commence. You must have clear regulations setting forth the rights of customers before announcing sales. Quite often, the regulations are an essential part of your sales process and give you an edge over your competition, especially if you are prompt in issuing them.
Knowledge about property taxes is critical. This is an important concern for developers. You can make informed decisions only if you have at least a basic knowledge about the different kinds of property taxes, where they apply, or how they are computed. Your profits might also depend on this.
Get the right help
At the end of the day, it pays off to get the help of legal professionals. It’s better to pay for help upfront than to have major problems later on. There are plenty of legal firms in the country which specialise in real estate law.
Note: This is a general guide and does not constitute definitive legal advice. Always do your own research and invest at your own risk.