Hoping to boost Cambodia’s flagging real estate sector, Prime Minister Hun Manet has issued several orders aimed at encouraging more foreign investment in property, and also urged microfinance companies to make it easier for homeowners to refinance delinquent mortgages.
The country’s 1993 Constitution states that “only natural persons or legal entities of Khmer nationality” can own land, although foreigners have been able to purchase real estate leases that sometimes last as long as 50 years.
On Tuesday, Hun Manet announced that the government will allow foreigners to use Cambodian representatives to purchase real estate. Although land titles would list a Cambodian as the owner, a separate contract would protect a foreign investor, he said at the annual Government-Private Sector Forum in Phnom Penh.
Foreigners can also buy property through land through special tourism zones – which the government is still working to define – or through a trust company, he said.
“This doesn’t mean the government is selling land to foreigners. We will own the land and we will respect our Constitution,” he said. “We are setting up conditions that will boost our economy and will help ease people’s concerns.”
With property prices in a slump, the private sector has been pushing the government to give foreigners new ways to own land and homes, Hun Manet said at a bridge inauguration on Wednesday.
Post-pandemic market
Real estate and construction sectors accounted for some 15% of the Cambodian economy as of January 2023.
The real estate market, however, has been deeply affected by the COVID-19 pandemic. Nonperforming loans have risen and new construction has slowed.
Hun Manet’s policies won’t be enough to counter the market’s downturn, according to legal scholar Vorn Chanlout. Additionally, they can’t be implemented effectively because of Cambodia’s corruption and ineffective state institutions.
“The policies will lead to sovereignty issues in the future and human rights abuses due to land conflict,” he said.
Also on Wednesday, Hun Manet said that the government and the National Bank of Cambodia have eased some loan conditions that could make it easier for banks and microfinance companies to help customers who are facing financial problems.
“If the customers have a problem, the bank and microfinance institutions and the government will face the problem as well,” he said. “Please help relieve customers. We must help each other in this difficult time.”
Cambodia Microfinance Association spokesman Kaing Tongngy said institutions have begun working to make refinancing more available for customers in response to the government.
“Because people have seen a drop in their income, we urge them to ask for refinancing. I ask customers to have courage and honesty and speak about microfinance for refinancing,” he said.
Translated by Yun Samean. Edited by Matt Reed and Malcolm Foster.