Real Estate and Construction Sector Needs Reform to Thrive

Despite acknowledging the effort made by the government for improving the real estate and construction sector, the European Chamber of Commerce in Cambodia (EuroCham) suggested 11 policy recommendations that the government should make for the sector to thrive.
Workers work on a construction in Phnom Penh. Kiripost/Siv Channa
Workers work on a construction in Phnom Penh. Kiripost/Siv Channa

A White Book on Real Estate & Construction 2023 has made a raft of recommendations to enable the sector to thrive, ranging from building co-ownership, hazardous materials regulations, financial regulations, transparency on property transfer, to stronger regulatory enforcement.

The white book was unveiled at Sofitel Phnom Penh on May 23, and outlines 11 policy recommendations. During the forum, Dr Pen Sophal, Secretary of State at Ministry of Land Management, Urban Planning and Construction, said that the Cambodian government has recently drafted new laws that are in alignment with technical, social, and economic context of the ASEAN development goals aimed to improve the safety practice in the sector.

After the Boom, Cambodia’s Real Estate Sector Sees Red

He further added that sub-degrees and prakas were put into enforcement in response to the policy recommendations of EuroCham Cambodia.

Furthermore, he stressed the importance the real estate and construction sector play in the government’s plan to transform the country to upper-middle-income by 2030 and high-income by 2050.

In the past three decades, Cambodia achieved an average economic growth of around seven percent - one of the highest growth rates in the world. “This encouraged the Royal Government of Cambodia to set a goal to transform the country to an upper-middle-income by 2030 and a high income by 2050.” said Sophal.

He added, “Given the transition to urbanization in Cambodia, the real estate and construction development have become the backbone of Cambodia's economic growth.”

Early this year, Cambodia achieved the status of a lower-middle income country by the World Bank. This means that Cambodia has a gross national income (GNI) per capita of between $1,036 and $4,045.

GNI is an economic indicator that measures the total income of a nation given a one-year period after including domestically and internationally earned income of its citizens.

Based on the World Bank, as a lower-middle-income country, Cambodia’s economic development level is relatively low and there are challenges to address.

Recently, the boom in the real estate and construction sector in Cambodia was due to the flow of foreign investment from China, South Korea and Japan, causing the construction sector to have an average growth of 6.3 percent annually.

After surviving the Covid-19 pandemic, Cambodia’s real estate and construction sector is projected to grow at an average rate of 9.4 percent between 2023 and 2026, according to a 2022 report by Research and Market.

Between 2008 and 2019, the area of the capital city has doubled in size, an increase from 286 square km to 679 square km, as well as its residents, an increase from 1.24 million residents to 2.3 million in 2019.

Sorn Seap, president of Cambodian Valuers and Estate Agents Association, welcomed a move that saw Cambodia achieve a trusteeship initiative this year. However, he said that a regulatory framework is needed to improve the real estate sector, making access to financial support easier.

In the past, foreigners did not have the right to own land in Cambodia because the government restricted land ownership to Cambodians and the state only. But, as of now, foreigners can own a portion of land (not entirely) for a period of 15 or 50 years.

This reform contributed to the increase in foreign investment in Cambodia. “Yet, compared to more developed countries in the region such as Thailand, Singapore and Indonesia, Cambodia is still behind these countries regarding land ownership,” he said. “Therefore, improvement is needed for the sector to grow. ”

Seap believes that despite the improvement in finance in the past 10 years, it remains a challenge for property buyers and developers to access finance for their development.