As the last frontier country in Southeast Asia welcoming foreign investors with open arms, Cambodia will be a leading destination for property buyers in the coming decade. With its one of the fastest-growing economies in the world, savvy investors with some risk appetite can gain excellent yields in this growing market. Foreigners can own real estate in Cambodia, but there are restrictions. Therefore, before you engage in Cambodia’s property market, you must learn about ownership regulations and what kind of property you can buy.
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Legally, foreign nationals are not permitted to own freehold land in Cambodia.
Foreigners are allowed rights of ownership over specific properties, subject to the 2010 Law on Provision of Ownership Rights. However, these rights are constrained to buildings that have obtained a “Strata Title”, which is available only to newly built apartment buildings. Foreigners can fully own private units from the first floor and above to a maximum of 70% of the total units in any co-owned apartment building.
There are four types of titles available for real estate in Cambodia:
A hard title is the official recognition, thus the strongest form of property ownership in Cambodia and considered the most preferred Cambodian land title.
Hard titles are an ownership certificate issued by the National Land Management and Planning Office. They contain detailed information that has been duly recognized and certified at a national level with the Ministry of Land Management, Urban Planning and Construction.
A transfer tax of 4% applies when a hard title transaction occurs. A hard title transfer takes approximately four to six weeks to process.
A soft title is the most common Cambodian land title, with about 70% of real estate in the cities have soft titles.
It is a property title that is recognized at the local government level. Soft titles are granted by the local Commune or District and are not registered at a national level – but are still regarded as a possessory status. Local authorities can usually issue soft titles within 5 to 10 working days.
The majority of property transactions still take place with soft titles to avoid ownership transfer taxes and fees. Nevertheless, soft title ownership may be contested by third parties and are exposed to litigation. Most of the new major development projects are being transacted with hard titles as these are considered the most durable land title in Cambodia.
Besides, the Government is systematically converting all soft land titles to hard titles.
|Hard titles||National level recognization||Transfer tax of 4%|
|Increasingly available for foreigners|
|Better protection and more information about the previous ownership|
|Soft titles||Quicker and easier transfer process||Cannot obtain a mortgage|
|Widely preferred and most commonly used|
A Land Management and Administration Project (LMAP) title is the latest, most secure and transparent form of hard title in Cambodia.
LMAP was first introduced in Cambodia in 2002 by the World Bank with authorization by the Government. Its declared goals were to improve land tenure security through registration and issuance of titles. The Ministry of Land Management is the principal implementing agency for this process.
LMAP titles add GPS information missing from conventional hard titles. These geotagged points clearly define the coordinates of the property’s boundaries, preventing the risk of any disputes over the land. LMAP title also often gives owners a higher value because of its reliability.
Applying for an LMAP title involves direct communication with the Ministry of Land Management and other relevant officials. This is because an LMAP is recognized at the national level.
Obtaining an LMAP title takes between six to twelve months as a matter of practice for properties that have already been surveyed.
In 2009, strata titles were introduced and allow foreign nationals to fully own private units of co-owned buildings in Cambodia to spur foreign investment in the local property market.
A strata title refers to the ownership certificate of an individual unit in a co-owned building. The building space consists of private units that are exclusively held by an individual owner and other areas that are commonly owned (amenities like lounges, pools, and gyms). As mentioned, strata titles allow foreign ownership of up to 70% of a co-owned building, given that foreigners can only purchase property on the ﬁrst ﬂoor or above.
To verify the legality of the strata title before purchase, buyers should inspect the developer’s hard title and the master development plan, and cross-check these documents with the ministries. These documents give buyers access to crucial information about the owner, property and title classification.
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Although foreign nationals are not permitted to own freehold land outright, several options enable a foreign national to hold interest over land.
Set up a legally recognized company where Cambodian citizens own 51% of shares. This entity presents the least risk for foreign investors. However, this is generally best reserved for high-value real estate in Cambodia due to the cost involved with setting up the company. It is also important to note that any LHC (land holding company) will be subject to tax on profits.
Long term leases allow all necessary rights to develop the land and gain construction permissions. Due to a recent change in the law, lease lengths are capped at 50 years, renewable for a further 50 years. If the state owns the land, the lease period shortens to 40 years. Leasing can be a great stepping stone to eventually setting up an LHC.
One of the best things to do before entering any leasehold agreement with a landowner is to conduct a title search to identify who owns the title and if there are any encumbrances registered in the property.
The Government considers citizenship applications from foreign nationals when they fulfil either one of the requirements:
Once citizenship is granted, the foreigner will be able to own both land and real estate in Cambodia in their name.
Buying in a Cambodian citizen’s name is simple and is the most economical means of controlling Cambodian land. However, by doing so, you will be disregarding the Constitutional prohibition on direct ownership of property by foreigners. Hence it is strongly discouraged by legal support in Cambodia.
Some companies offer a professional service where foreigners can purchase land for sale in Cambodia, but the title is held in the name of a local citizen. These companies provide a measure of reducing the more obvious risks of using a spouse or friend as the name used to hold the land. When choosing this option, we advise a high degree of due diligence due to the lack of regulation available.
Go where there is growth. If you’re looking for somewhere that returns a reasonable profit in a relatively safe socio-economic and geo-political environment, then Cambodia may be your answer.
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