In recent years, Cambodia has demonstrated significant strides in its economy as a previously underdeveloped country. Cambodia is urbanizing incredibly, and various other sectors are also booming. The development in the country, especially in its capital Phnom Penh has intrigued both foreign and domestic investment, and real estate is one of the sectors that have caught everyone’s eye. According to WHO, Real estate is booming in every sector. Whether it is the commercial market, the residential housing market, or the agricultural market, it has proved to be a promising investment opportunity in this ever-growing economy. So if you are looking for an investment opportunity, buying a property in Cambodia is a good option. If you are a Cambodian citizen, it would be pretty easy for you to purchase land or property, but if you are a foreign national, there are a few Cambodian real estate laws that you must keep in mind. There are cambodia property for sale you can look for your investing purpose.
Land title classifications in Cambodia
In Cambodia, the classification of lands is done based on four titles:
1. Hard titles:
In Cambodia, it is the most secure and robust land title and form of ownership available. The institution that issues hard titles is the Ministry of Land Management, Urban Planning & Construction, which is recognized nationally. National Land Management and Planning Office provides the certificate for a hard title. The hard title will take authoritative ownership if a property is registered under both a challenging and soft title. There is a 4% transfer tax on hard titles, and obtaining it is time-consuming.
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2. Soft titles:
It is the most issued Cambodian land title among the four. It has a possessory right, which the local government recognizes in the local commune or district, but the government does not recognize it nationally. The local government manages soft titles, so their transference is rapid and inexpensive. But it isn’t as substantial as hard titles as third parties can still contest it. This disadvantage has led most new development to register under demanding titles.
3. Strata titles (co-ownership):
Strata titles are possession rights used for condos in which Khmer citizens and foreigners are allowed to co-own a property. This title is recognized by the Ministry of Land Management, Urban Planning, and Construction at a national level.
It is a new concept, only applicable to new buildings built from 2010 onwards. However, foreign ownership is still limited to 70% of the entire co-owned building. Additionally, foreigners cannot own properties located on the ground floor of a building as this violates the law governing land ownership. Strata titles are also lengthy, like demanding titles, with a transfer cost of 4%.
Land Management and Administration Project(LMAP) is another land title recognized nationally by the Ministry of Land Management, Urban Planning, and Construction. The World Bank started the LMAP in 2002, with its goal being land security using a system that registers land titles. An LMAP title has a transfer cost of 4% and a time-consuming transference process. An LMAP is different from a hard title as it has GPS coordinates that accurately identify the boundaries of a property.
Can Foreigners Buy a Property in Cambodia?
Yes, foreigners can buy property in Cambodia under the strata land title with restrictions, but they cannot have a freehold of the land. Foreigners can only own up to 70% of properties in any buildings with a strata title that too only on the first floor or higher, not the ground floor, as it will violate Article 44. There are a few ways by which foreign nationals can own property in Cambodia:
1. Setting up a land holding company with a Cambodian citizen
In this, the foreign national establishes a company to own the land, which is the safest legal method. By partnering with a Cambodian legal entity, foreigners can own 49% of private property, with or without a structure. A Cambodian legal entity is any legal entity with 51% or more of its shares held by Cambodian citizens. The Land Holding Company (LHC) can be set up in a way that the foreigners, who are minority shareholders with 49% of the company, could have sole decision-making and voting rights in the company, while majority shareholders who are the Khmer nationals hold 51% of the company and have limited rights and powers. The applicable legislation, Article 16, says that land ownership is assigned to a legal entity if more than 51% of the share belongs to a legal person with Cambodian citizenship. Several private agreements are signed in which the Cambodian shareholders grant the foreigner majority of rights. We recommend pledging the purchased property with the foreigner’s name as the lender to ensure that the land can not be used as collateral for the loan unless the foreigner mandates the land registry to exempt the mortgage-secured land. This option is recommended for foreign investors who want to invest in high-value properties since setting up a company can be expensive and subject to tax on profits.
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2. Using a leasehold agreement
The other most common way for foreigners to control land in Cambodia is through long-term leases. Many private agreements signed with Cambodian shareholders grant special rights to foreign investors. These agreements are valid and secure.
The maximum validity for long-term leases is 50 years which you can extend. These leases are registered by the Ministry of Land Management, Urban Planning, and Construction at the national level. Because of the hardships of foreign ownership in Cambodia, many international investors have chosen long-term leases. To stop a second property sale, you will need security agreements, such as a mortgage and a notice to block sales. The mortgages and block sales notices are steadfast and can be obtained directly from the Land department offices of the MLMUPC.
3. Acquiring a Cambodian citizenship
The other way to buy the land is by acquiring Cambodian citizenship. Cambodia allows dual citizenship. You can get Cambodian citizenship by naturalization and getting married to a Cambodian citizen. You can get citizenship by naturalization if you have lived in the country for at least seven years and three years by marriage. You must know the Khmer language, culture, and history. Becoming a Khmer citizen grants foreigners the right to possess the land and encourages them to become citizens. If you don’t want Cambodian citizenship by naturalization or getting married, another way to acquire citizenship is by donating. Article 12 of the Cambodian Nationality Act provides a method to obtain Khmer and Cambodian citizenship via investment by donating $250,000 in cash to the Cambodian economy. Per Article 8 of the Law On Nationality, paragraphs 1, 2, 5, and 6, if a foreigner contributes USD 100 million or more to the state budget and is interested in the country’s redevelopment, he or she may apply for Cambodian citizenship.
4.Purchasing land using the nominee structure
According to Cambodian constitutional law, only persons or legal entities with Khmer nationality are entitled to own land. Another way foreigners can buy land in Cambodia is for a Cambodian representative to hold the deed on their behalf. We do not advise this method unless the nominee is your spouse.
Nominee ownership is the most common method that real estate companies frequently offer because it is the most effortless in terms of paperwork and time consumed. Nevertheless, we do not recommend the nominee method as it has serious flaws.
If the nominee is your spouse, then it is entirely legal for his/her to be a nominee for you to buy land. Remember that you can’t sell the property without permission from your spouse in Cambodia. For this method, you must have a Cambodian spouse and registered marriage in Cambodia.
In the nominee structure, a foreigner signs with a Cambodian citizen a trust agreement that grants the foreigner complete control and purchase rights over the land. Using this system is easy and inexpensive, but it’s discouraged because it violates the Khmer Constitution Law, preventing direct foreign ownership. The documents are used to prove that foreigners have authority over land purchased.
Many Cambodian courts have found the nominee method to be illegal in many cases and have described it as an evasion of Cambodian law. We recommend using other safe, legal methods recognized by the Cambodian government.
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What are the requirements for a foreigner to buy property in Cambodia?
A foreigner only needs a current passport and visa to buy a property in Cambodia.
Can Hiring an Agency Make it Easy to Own A Property In Cambodia?
Yes, it is always better to hire an agency as it could be difficult for you to manage all the legal aspects of buying a property, and the language barrier could also hinder the process. IPS Cambodia is the best real estate agency in Cambodia that will help you own the property you desire. Our team will assist you with all aspects of the lease agreement and ensure that all your expectations are met throughout the process. We will help navigate the market and drive your search in the right direction. We keep all our dealings transparent as everything is disclosed up front, and no hidden fees or charges are applied.