​Latest! The ultimate guide to real estate investment in Cambodia 2022

As an important country along China's One Belt One Road ,  Cambodia has been a famous investment destination country for foreigners in recent years. Since 2012, the Cambodian real estate industry has begun to emerge, high-rise building real estate projects in the capital of Phnom Penh have sprung up in a short period of time, and the housing price has remained high. The average price of high-end apartments in Phnom Penh in 2021 will be as high as $2,745/㎡.

When investing in Cambodia, many foreign friends are very curious, "Can foreigners buy and sell real estate in Cambodia?"

The answer is yes, Cambodia is an open country for investment, and the investment threshold in the real estate industry is also very low. It is possible for foreigners to buy and sell real estate in Cambodia, as long as they have enough budget and the buyer's passport to conduct real estate transactions. However, Non-Cambodians are not allowed to own real estate with joint land. Foreigners can only hold property rights that are second floors up and can only register building property rights without land property rights. That is to say, foreigners cannot buy a property in their own name including villas, flats, whole buildings, or land.

(1) What are the real estate rights in Cambodia?

Before investing in Cambodian real estate, you must understand these property ownership:

1. Hard title

Hard titles are permanent property rights, which are the most advantageous form of property rights in Cambodia. They are held by the national central government based on land law. At present, most of the newly built properties are hard titles, including land-use certificates and house certificates, which are protected by law and can be mortgaged.

There are two types of hard titles: real estate holding certificate (certificate of land use right) and immovable property ownership certificate (house ownership certificate), both of which can be mortgaged to banks for loans.

Processing time: 8-12 weeks

2. Soft Title

The soft title is the most common form of ownership. The real estate issued by the local government but not recognized by the laws of the Cambodian central government is usually a piece of ordinary A4 paper.

Processing time: about 2 weeks

3. Strata Title

The strata title is the newest form of ownership that allows foreigners to legally own property in Cambodia. This title refers to a building or building with multiple owners, where some parts of the building are exclusive to one owner (private units) and some parts are jointly owned by all owners (common areas). Cambodia's current housing properties in the form of strata property rights are mostly condominiums.

Under the strata law, at least 30% of the units in a condominium building must be owned by Cambodian citizens, while foreigners can only own up to 70% of an apartment or condominium building.

Processing time: 12 weeks

4.LMAP Title (Land management project)

LMAP property rights were introduced into Cambodia by the World Bank to improve the security of land property rights through the Cambodian Ministry of Land Management, Urban Planning, and Construction. This form of land property rights can solve boundary competition and allow all parties around the land to reach a boundary agreement. It is the safest type of property right.

(2) House purchase/sale processing

1. There are 6 steps in the purchase of a new house in Cambodia: viewing the house and choosing the house - paying the deposit - signing the agreement - paying the down payment - signing the contract - handing over the house

a. House inspection and selection: that is, screening the real estate you like, looking at the house type, floor, landscape, location, supporting facilities, price and other factors;

b. Pay the deposit: after you have selected the desired house, you can place a deposit to book. In Cambodia, the deposit is generally $3000;

c. Signing an agreement: In Cambodia, foreigners who buy a house can sign a Sales and Purchase Agreement (SPA) with their passport and determine the payment plan for the purchase of the house. In general, developers offer a variety of payment methods, including full payment or installments;

d. Down payment: Usually, the down payment is made within 7 days after the deposit is delivered. Cambodia's down payment ratio is basically 10%-30%, and the ratio is determined according to the construction progress of the house;

e. Signing a contract: Sign a house purchase contract and supplementary agreement with the developer;

f. Handover house: When the project is completed and handed over, the final payment (usually 10% in installments) will be paid. After handing over the house, you need to apply for a hard card. The processing time is about 3-6 months, and some developers have agreed to apply within one year.

2. Buying a second-hand property will omit many steps. As long as the buyer is satisfied with all aspects of the property, and has a sufficient budget and prepares the required documents, he can apply for the transfer of the property.

(3) Process of transfer of property rights

Ownership of the property will be transferred from the seller to the buyer after all property transaction conditions have been met. The real estate transfer process is as follows:

1. Both parties must sign and fingerprint on the property transfer letter (Vente definitive) in the presence of local officials in Cambodia;

2. The sales contract and transfer application must be the standard template provided by the Ministry of Land Management, Urban Planning and Construction

3. Both parties must submit additional documents to the Ministry of Land Management, Urban Planning and Construction and the as required

        a. Corporate transactions: Proof of decision of the company directors and three certified copies of valid ID cards (Cambodians) or passports (foreigners) of the official representative

b. Personal transactions: Three certified copies of valid ID cards (Cambodians) or passports (foreigners), while for foreigners with Royal Decree granting Cambodian citizenship just required a copy .

4. After submitting the required additional documents, the land management authority will submit the property title transfer along with other important documents to the regional office for confirmation, and will contact the previous contact to inform the progress;

5. After the confirmation of the regional office, all documents will be submitted to the General Department of Taxation for review and tax calculation based on the estimated market price;

6. The property transfer tax is paid by the designated party to the GDT through the local bank;

7. Finally, the official property title certificate for the new owner is issued by the land management authority, and when the process is complete, the authority official will notify the previous contact that the title can be obtained.

(4) Matters that buyers need to pay attention to:

1. There are four key legal documents new home buyers need to check with developers, including:

a. Subdivision of hard title and land  hard title (eg: strata title)

b. Registration of the developer company

c. Approval of the Master Plan

d. Construction Permit

2. Although second-hand houses can be bought and lived immediately, in order to avoid being scammed, buyers should still pay attention to the following matters:

a. Check the title of second-hand housing

b. Confirmation when the original owner moved out

c. Determine whether there is a problem with the transfer of property rights

d. Understand the interior decoration of the house

e. Pay attention to the condition of the house

3. In addition to the above points to note, you should also know what are the fees when conducting real estate transactions?

a. Stamp tax fee: also known as transfer tax or real estate transfer tax, the tax amount is 4% of the total property price (usually the seller pays the tax, but the buyer is obliged to pay the transfer tax according to law).

Recently, in order to facilitate the epidemic recovery, the GDT extended the stamp duty  from the sale of properties worth $70,000 or less until the end of 2022.

b. Capital Gains Tax: It is taxable income from the sale or transfer of capital less deductible expenses and is taxed at 20% of the total value of the property.

There are two types of capital gains tax:

** Costs before expenses are deducted

→ Capital Gain = Sale Price of Real Property - (Sale Price of Real Property x 80%)

** Cost after deduction of expenses

→ Capital gains = sale price of real property - (cost of real property - total related expenses)

Therefore, the tax that needs to be levied is 20% of capital gains.

At present, the Cambodian government has decided to extend the capital gains tax until January 1, 2024.

c. 10% VAT: When the property is resold, if the buyer is a VAT registered company, VAT needs to be paid

d. Property tax: The tax amount is 0.1% of the total property price

e. Other fees such as: agency fees, attorney fees, mortgage application fees, housing insurance fees, etc.

What fees and how much will the buyers and sellers pay when they sell or purchase real estate?

(5) Payment method: 

1. The full payment is relatively simple. Generally, new houses and second-hand houses are paid in full;

2. Some projects have installment payments. Under normal circumstances, the house payment will be made according to the progress of the project, such as prepayment, completion of foundation and interior preparation, etc.

3. In addition to full payment and installment payment, foreigners can also choose to buy a house with a loan in Cambodia, and the maximum loanable property price is 65%.

(6) Can foreigners get loans? What are the loan conditions?

Foreigners can also take out loans to buy houses in Cambodia. There are two ways to take out a loan to buy a house:

1. Apply for a loan from a bank: First of all, you must consider these two points before applying for a loan from a bank.

a. Provide proof of income: proof of income is an important basis for banks to assess whether the borrower has the ability to repay the loan, and to a large extent determines whether the loan application can be approved.

b. Choose a trustworthy and strong financial bank  : Cambodian residential loans are all floating interest rates. That is to say, during the loan period, the bank can change your loan interest rate. Therefore, when choosing a bank, you must choose one that is trustworthy and has strong financial strength.

2. Apply for a loan from the developer: If the loan you applied to the local bank is not approved, you can also choose to apply for a loan from the developer. There are some developers who also offer loans, which are a little easier in the process, but the interest rates are relatively high.

However, it should be noted that some developers in Cambodia have little transparency in the operation process. So if you want to avoid  problems in future, be sure to do a thorough research on the developer company you plan to buy from.

***Documents required for loan:

1. The borrower must be between 18 and 65 years old

2. Valid ID/Passport

3. Bank Statement/Proof of Income (last 3 months pay-slip)

4. Purchase Agreement

5. Property hard title as collateral

6. Valid business registration

7. Property Valuation

8. Proof of employment.

Buying or selling real estate is a very important thing, not to mention being a foreigner when buying or selling Cambodian real estate, you must be cautious. Therefore, if you have real estate needs in Cambodia, be sure to communicate with buyers and sellers to confirm clearly, or consult real estate professionals to avoid being deceived.

Compass Real Estate Contact: +855 (0) 966300265