Cambodian real estate investment has many merits unique to emerging countries that developed countries do not have, and by combining the merits unique to Cambodia, it is an attractive investment destination. When you start investing in real estate in Cambodia, keep the following characteristics and points in mind.

Income gain and capital gain

There are two types of income from real estate investment: “income gain” from rent income and “capital gain” from trading margin due to an increase in real estate value. These are more profitable in countries where both population growth and economic growth are positive. This is because the increase in population is proportional to the increase in housing demand, and future increases in housing prices and rents are expected along with the rise in wages and prices. Compared to Japan and developed countries, real estate investment in Southeast Asia has the largest growth margin. Real estate investment in Cambodia can also be aimed at both capital gains and income gains.

Is the investment target land or building?

Many people have heard that foreigners cannot buy land in Cambodia. That’s right, in Cambodia, foreigners are prohibited from owning land, regardless of whether they are individuals or corporations. Even in Cambodia, where foreign capital is widely allowed, land ownership is not free. Since land ownership by foreigners is a problem related to the existence of the nation, many foreign countries prohibit it, but strictly regulate it. It is rare internationally that Japan has no restrictions on land acquisition by foreigners.

However, because the nominee system is available in Cambodia, there are actually many foreign companies and foreigners who own the land in Cambodia. However, since there are more procedures than condominium sales, agents and real estate companies that aim for brokerage fees are less likely to handle it. With the right information, you can increase your investment options. If it is a building, you can aim for both income gain and capital gain, and if it is land, it is harder to aim for income gain than a building, but there is an advantage that maintenance is very easy.

Foreigner real estate ownership in Cambodia

In Cambodia, real estate ownership has restrictions on foreign corporations and foreigners who do not have Cambodian nationality. The definition of a foreign corporation is a corporation in which Cambodian nationals do not have 51% or more of the shares. Ownership of land is prohibited as described in the previous section.

With the revision of the law in 2010, it has become possible for non-resident foreigners to own apartments, condominiums, and other condominiums. You can own the upper floors above the second floor, excluding the basement and the first floor. In addition, the upper limit for foreigners is 70% of the total occupied area of the building for each property.

In addition, the transfer of ownership of real estate by agreement is said to be effective only after the transfer of registration. Therefore, in order to claim the right, it is important to properly register and obtain a written right. It takes one and a half to two months to register the transfer of ownership due to the payment procedure for real estate transfer tax (4% of the transfer price). Registration of compartmentalized buildings such as condominiums tends to take longer.

Can I get a loan in Cambodia?

We recommend that you prepare your own funds for real estate investment in Cambodia. Financial institutions in Cambodia are currently offering mortgages for foreigners at some banks such as RHB Cambodia, which is a Malaysian bank, but the examination is strict and the loan interest rate is as high as 8%.

When considering financing, it is still realistic to choose a mortgage loan at a financial institution in Japan. However, full loans are not always available, so it is necessary to confirm the collateral conditions of each financial institution before applying, taking into account the withdrawal of own funds.

Bribe society of Cambodia

Although not limited to Cambodia, there is still a “bribery society” in Cambodia that almost always exists in developing countries. There may be an idea that foreigners have money. It is decreasing now, but if a foreigner is driving, the car will be stopped and you will be charged money even if there is no violation, and if you find out that you are a foreigner during the registration procedure, the staff in charge will charge an additional fee In the past, you have to come and give a bribe to complete the procedure.

I’m surprised because it’s not possible in Japan, but there are ways to deal with this, so please choose a real estate company that also supports local circumstances.

Two types of area notation

There are two display methods for the area notation, “gross area” and “net area”, and in overseas real estate, the stated area notation is often “gross area”. Area notation is not unified in Cambodia, so if you want to know the actual size of a room such as a condominium, check the net area.

 “Net area” in Cambodia refers to the exclusive area in Japan, which is the sum of the area of the exclusive part in the dwelling unit and the area of the balcony or veranda. “Gross area” is the total floor area of the building, which includes the area of common corridors, stairs, and other common areas, allocated to each unit. Therefore, the gross area is used in the calculation of management costs, but it is inappropriate to consider it as the actual dwelling unit area. Also, when checking the unit price per square meter, it is necessary to check whether it is calculated based on the net area or the gross area.

Difference between hard title and soft title

There are two types of titles for ownership registration of Cambodian real estate: “hard title” and “soft title”. Hard titles correspond to titles in Japan. In addition, there are two types of hard titles. On the other hand, the soft title functions as “proof that the real estate was bought and sold” rather than proof of ownership of the real estate. Get a hard title in Cambodian real estate investment. Hard titles are also issued for condominiums and other compartmentalized ownership.

In Cambodia, real estate ownership before 1979 has been invalidated due to the denial of land ownership during the Pol Pot administration and the subsequent civil war. Cambodia revived the rights with the support of foreign countries, but due to the difference in the support entity depending on the time, there are two types of hard titles. The potency is the same.

As of the end of September 2017, about 65% of the country was still unregistered, but registration is progressing little by little, and new hard titles are being prepared in Phnom Penh. Since the new hard title has been converted into a data system, it is not possible to move to the new hard title in areas where maintenance by government agencies cannot keep up. Therefore, due to the nature of each title, it cannot be said unconditionally that it is inferior because it is a soft title in practice and that it is highly valuable because it is a hard title.

Tax system and tax treaty

You are not taxed in Japan just because you bought and owned real estate outside of Japan, including Cambodia. However, Japan is taxed when income is generated, based on the concept of “global income taxation”, which imposes tax on profits earned anywhere in the world. At that time, since the tax treaty has not yet been concluded between Cambodia and Japan, double taxation will occur between Japan, the country of residence, and Cambodia, the country of origin. To consider investing in real estate in Cambodia, know what taxes are in Cambodia and what are in Japan.

 What are the taxes in Cambodia?
Even in Cambodia, there are taxes that are levied in each situation, such as when you acquire or own real estate, when you earn income from real estate, or when you sell real estate. However, Cambodia is in the process of developing tax laws, and some taxes are not actually in operation. It is explained in detail in “About the tax system in Cambodia“.

What are the taxes in Japan?
Taxes are only levied when income is generated, such as when rent income is earned or profits are made on sale in Cambodia. They are taxed as rent income and real estate transfer income tax in Japan. In addition, if the total amount of overseas assets held exceeds 50 million yen, it is necessary to submit a report on overseas assets called “Foreign Property Record” to the tax office at the time of final tax return.

Future tax treaties between Japan and Cambodia
Cambodia has already signed tax treaties with Singapore, China, Brunei, Thailand and Vietnam. And now the Cambodian government is negotiating with Japan, South Korea, Malaysia and the Philippines to conclude a tax treaty. It is highly likely that a tax treaty will be signed between Japan and Cambodia in the near future, so keep an eye on future developments. Please refer to the figure below for the status of tax treaty conclusions as seen from Japan.

Information gathering and real estate company selection

Finding a reliable real estate company is important in Cambodia. For overseas real estate, the amount of accurate information that can be obtained is inevitably reduced due to differences in language and lack of knowledge of the land, and it is also difficult to investigate by yourself. Even in the current Internet environment, it is difficult to obtain the latest and correct information.

In Cambodia, the development of laws and regulations will be upgraded one after another in proportion to the remarkable economic growth. Furthermore, even if the response is different depending on the person in charge, or if there is any change, there are few situations where the other party will notify you, so some ingenuity is required.

English can be used in Cambodia, but conversations in Khmer between locals are important for scrutinizing detailed contents and advancing in an advantageous manner during business negotiations and negotiations. Also, official documents must be written in Khmer. English is also used, but the interpretation and nuance may change when translating from Khmer to English and from English to Japanese.

Rather than choosing a Japanese company based solely on the sense of security that you can speak Japanese, whether you have a local base, have a registration or license, are familiar with the local area, interpreters and how much support you can provide. Let’s select it by checking whether it is. When choosing a lawyer in Cambodia, it is safest to think about your role and ask a lawyer who can compete in Khmer in court in case of emergency.

Why don’t you think about attractive Cambodian real estate investment while holding down the points to be noted, how to select real estate agents and properties, and reducing risk by diversified investment.