Can foreigners Own Land in Cambodia?
Recently, Cambodia has seen great economic growth and developed many sectors including the real estate sector. With an increase in great investment opportunities, it is no surprise that there are more and more foreigners considering making investments in Cambodia. However, foreigners are not granted permission to directly own properties as part of the constitutional law in Cambodia. Nevertheless, this does not mean that foreigners cannot lease property in Cambodia. If you are wondering how this is possible, it is recommended that you continue reading the article until the end. The unfortunate news is that foreigners cannot “directly” own any properties in Cambodia, but the upside is that there are various alternatives to invest in real estate property in Cambodia still.
What type of properties can foreigners own or lease?
First of all, foreigners are given permits to lease properties that are located off the ground, meaning that foreigners can lease or own condominiums or apartments that are not on the ground floor of the buildings. However, foreigners are not allowed to own land in Cambodia according to Article 44 stated in the Cambodian Constitution. So how can foreigners engage in real estate investment in Cambodia?
Here is how foreigners can lease properties in Cambodia:
The solution to the problem above is to have foreigners use alternative ways to make the lease legal and lawful by either of these methods:
- Invest in Land Holding Companies (LHC)
For foreigners who have large funds to invest in Cambodia, investing in joint land holding companies or more can be very beneficial for the long term run. According to the Investment Law in Cambodia regarding Land Holding Companies, it is demanded that “the majority of the company ownership is accounted for by 51% of Cambodian shareholders”. This means that the legal power of attorney and control is within the responsibility of Cambodian citizens since the land will be registered under the ownership of the land holding company which is a Cambodian citizen. This approach, although is the most secure method since there is protection and aid by lawful attorneys and other layers of security, it is also costly considering the potential of high tax payment, admin fees, registration fees, and other additional payment fees.
- Invest Through Long-term Leasehold Agreement
Foreigners can also engage in long-term leasehold agreements to take advantage of the investment opportunities in the real estate sector in Cambodia. The leasehold agreement is required to have a minimum of 15 years of the lease and a maximum of 50 years per the lease agreement. Foreigners can indefinitely lease property by renewing the 50 years leasehold agreement with the property owner if desired. The long-term leasehold agreement on the property between a foreigner and the local property owner should be registered with the National Cadastral office and notified on the property title deed regarding this agreement.
- Invest Through a Nominee Structure
Another solution to not having a permit to lease property directly in Cambodia is through a nominee structure. Leasing a property in Cambodia with a nominee structure is a common and very low-cost method to invest in real estate property in Cambodia. In simple terms, this system requires a foreigner to nominate a Cambodian citizen to be the person with legal ownership of the property or as the person who is leasing the property. Seemingly how simple this method is, there is a high risk to this method. Therefore to lower the risk of this nominee structure, foreigners who plan to lease property through this method are recommended to choose a trustworthy nominee with clear background or a professional service provider and have a signed “trust agreement” between the two parties and witnesses. Moreover, to avoid any unforeseen risk, foreigners are advised to lease or purchase the property through a mortgage as the loan provider. It is also possible to marry a Cambodian citizen and have the spouse as the legal property owner too.
- Invest by Having Citizenship as a Cambodian
The final method, although not common but very effective, is investing once acquiring citizenship as a Cambodian. This investment method to lease a property might consume too much time and effort but is ultimately the most secure to the individual, after all the lease and ownership on all types of properties will be entirely the same for the individual. The process of being a Cambodian citizen will demand that the foreigner either had lived in Cambodia for over 7 years and is able to communicate in Khmer fluently both verbally and in written language or make an impactful donation or investment in the Cambodian society for future development purposes.
Which investment method is most suitable?
If you are an ex-pat or foreigner with a stable working position in Cambodia and looking to lease a property in Cambodia, you should consider leasing through a long-term leasing agreement or through a nominee structure. Considering the existing investment fund and period of residence in Cambodia, these two methods will present the most benefits to reap the growing real estate investment opportunities with low risk and less time consumption.
However, if you are just visiting or on a short-term residence in Cambodia looking for a business investment venture, it is recommended to invest in a land holding company or also engage in a long-term leasing agreement. These two methods will not require much attention overseeing the investment and are supported with legal and binding agreements for both parties to hold accountable if issues arise.
What foreigners should be aware of before leasing a property in Cambodia?
Investing in real estate in Cambodia can be easy or complicated depending on the strategy you employ before and during the leasing process, especially for foreigners. Here are some portions of information that should be considered before leasing the property:
- Land title classifications: there are different types of land title classifications in Cambodia including hard titles, soft titles, LMAP titles, and strata titles. Depending on the titles of the land, foreigners may find it easier to lease the land they are wanting to invest in.
- Legal owner of the property: although this may sound sketchy, it is definitely important to ensure that you are dealing with the rightful owner of the property to avoid scams when investing in real estate property.
- Scale of return on investment: even if the real estate sector is rapidly growing, not every location has equal investment opportunity or return on its investments. Therefore, it is highly advised to research the market value and development plan of the area.
- Investment risk calculation: depending on the property you want to invest in and the scale of investment, as a foreigner you might encounter a rather risky investment if not careful. It is advised to consult with a professional to make a careful decision before making the investment.
Is it ideal for foreigners to lease a property in Cambodia?
The answer to the question is a definite yes! Cambodia is a very welcoming country to investments from foreigners and the real estate sector, particularly, is very investment friendly to foreigners. The investment in real estate in Cambodia through leasing is a wonderful idea considering:
- There is no visa restriction to travel to Cambodia looking for investment opportunities.
- The laws for investment in Cambodia, in comparison to neighboring countries, are very efficient and investor-friendly.
- There is no need for a citizenship requirement to invest in the real estate sector as there are various more alternatives to make the investment.
- Cambodia is filled with a young and potentially developing market and workforce that will reap benefits from any type of investment.
If you make it to the end of the article, you have now gathered all the information you needed to invest in Cambodia’s real estate sector as a foreigner. Hopefully, you are more than convinced in investing in Cambodia’s real estate sector, after all the potential to double or even triple your investment is a highly achievable goal. On that note, whether you are a foreigner looking to travel to make the investment or are already residing in Cambodia, it is recommended to reach out to trustable professional within the real estate field to help you make an informed and low-risk investment decision. For further information, contact the CBRE team for consultation on your investment plan.
Click here to see: How to Correctly Invest in Land Property Development?