How to Correctly Invest in Land Property Development?
How to Correctly Invest in Land Property Development?
Are you looking for new investment opportunities to support your financial plans in the long run? Why not invest in land property development in Cambodia? Besides the country’s gradual GDP growth, the potential market for land property investment is also blooming. However, there are a few matters to keep in mind when investing in this sector to avoid fraud, risky investments, or cause financial problems. If you are wondering how to correctly invest in Cambodia’s land property development, continue reading below for more insight! Even if compared to other countries, investing in land property development in Cambodia is much simpler, there are still several necessities that you should look into when investing in land property.
Land Rights in Cambodia
Even though in recent years land development projects are increasing, there are still vast areas of land that are not developed which are a great opportunity for land investment. Before investing in any land area, it is encouraging to check the title of the land you are considering investing in. There are three main types of land rights in Cambodia you should be aware of:
- Freehold Land: This refers to full ownership of the land meaning that the owner of the land has full right to sell, lease, or develop the land without any conditions required from third parties.
- Leasehold Land: a type of land under a leasing or temporary contract from the land owner for a certain period.
- Concession Land: refers to land properties that are granted by the government for the purposes of specific development plans.
Learning the type of land rights you want to invest in will help you be better prepared for the investment, necessary documents, and other inquiries in the future.
Types of Land Titles
In addition to land rights, you should also be aware of land titles. Land titles are usually observed in three forms including
Lands with Soft Titles
Investment in soft titles land property is most common in Cambodia. The owner of this type of land is not recognized on a national level but is recognized by the local government since soft titles are provided by the district office. Soft titles lands are most common considering there is no requirement for ownership transferring taxes or fees, making it an easier process to buy or sell lands as investments. However, since soft titles are not recognized at a national level, it is advised to properly check the status and environment of the land in order to avoid complications in the long run.
Land with Hard Titles
Hard titles are registered and recognized by the Ministry of Land. Land with hard titles is generally the most secured property ownership in Cambodia, this makes lands with hard titles sought after but also pricey as well. When investing in hard title lands, you should be aware that there is an additional four percent transfer tax on the property value when transferring ownership from one to another.
Land with Strata Titles
Strata titles are the newest land ownership title that allows not only local but also foreigners legal ownership of land property. The difference between Strata titles and soft titles and hard titles and strata titles requires specific conditions and qualifications making them applicable to foreigners rather than locals.
In addition to the three most common land ownership titles, there is another land title to be aware of. This title is referred to as Land Management and Administration Project or otherwise known as LMAP Title. This title is recognized on a national level as well specifically for the land properties that are divided into different blocks with concrete boundaries as separate properties. This title helps to prevent disputes between multiple owners in the future.
If you are to invest in land property smartly, you should also be aware of the taxes that are applied to land property in Cambodia. A few taxes you should research when investing in land property are
- Property tax: the tax issued on all immovable property, including land, that is valued at over 100 Million KHR or $25,000 with 0.1% tax.
- Unused land tax: is issued toward lands that are kept unused or undeveloped by the owner at a 2% rate.
- Transfer tax: is applicable when there is a transfer of land ownership from one party to another. The transfer of land property is taxed at 4% and must be paid within three months of the transfer.
Besides the three taxes, there are other taxes that are imposed as well according to the situation such as the tax on property rental and capital gains tax.
Special Investment Case for Foreigners
As mentioned briefly earlier, foreigners are only allowed to have strata titles for land ownership if they were to invest in land property in Cambodia. Besides owning a land property with strata titles, here are a few other ways foreigners can invest in land property in Cambodia such as:
- Investing through a local nominee: this method will require the individuals to form a trust agreement with one another meaning that the individual who is a local will place their name as the land owner while the individual who is a foreigner becomes the financial provider to own the land. This process might be complicated and risky and require professionals to help.
- Investing through leasehold or concessions land: foreigners have the ability to own land property in Cambodia if those lands are considered leasehold property or a part of concession land property
- Getting Cambodian citizenship: another method to start owning land property is by becoming an acknowledged citizen of Cambodia. However, this process is not commonly used since the process is more complicated and time-consuming than the rest. An alternative approach is for the foreigner to marry a Cambodian and use their spouse’s name as the owner of the property.
Investing in land property in Cambodia does require a lot of strategic thinking and approach but is however still an easier investment to make compared to other countries. Nonetheless, before investing and to make sure that you are investing in land property correctly, be sure to learn of the land rights and titles, the imposed taxes, and other related factors. For a consultation, please contact CBRE Cambodia Capital Markets Team via this email: [email protected] or call +855 61 444 024 (Telegram or Whatsapp).
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