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Cambodia is one of the fastest-growing countries in Southeast Asia and attracts increasingly foreign multinationals. This is spurred by Cambodia’s low-cost workforce, young population, and future prospects.
Over the years, well-known brands like Le Meridien as well as MCC Land, a renowned Singaporean property developer, have entered the market.
As Cambodia sees an increased demand for residential, commercial, and industrial real estate, investors have started to target valuable land plots in Phnom Penh, beachfront land in Sihanoukville, and Siem Reap.
In this article, I explain how foreigners can buy land in Cambodia and what you must pay attention to.
Topics covered:
- Can foreigners buy land in Cambodia?
- Foreign Property Ownership Regulations
- Land Titles in Cambodia
- Land Prices in Cambodia
- Taxes
Can foreigners buy land in Cambodia?
The same as for most other Southeast Asian countries, foreigners cannot own land in Cambodia.
This is formalized as follows in Article 44 of the Cambodian constitution: “only natural persons or legal entities of Khmer nationality shall have the right to land ownership”.
As Cambodia becomes an increasingly interesting investment destination thanks to its fast growth and comparably low real estate prices, more and more foreign investors ask how they can get access to land ownership in Cambodia.
Even if foreign individuals aren’t capable of owning land, you can own land through local contractual setups.
The options you have are:
- Leasing the property using a simple contract
- Leasing the property using a perpetual lease
- Set up a local land holding company
- Acquire land with the help of a Cambodian nominee
- Marry a Cambodian citizen
- Get Cambodian citizenship
The first four options are the most interesting for us to know more about and that we will focus on in this article.
Let’s start and review how it works when leasing property using a simple contract.
1. Leasing a Property Using Simple Contracts
As explained in my separate article about how foreigners can buy real estate in Cambodia, going for a leasehold agreement is most likely your easiest option. The leasehold period ranges from 1 to 70 years with a chance for renewal.
Sometimes, foreigners include a provision stating that the lessee has to accept any sales of the land. But, as lease contracts aren’t registered at the Land Office, the landowner has no practical obstacles to sell the land to another person or entity.
Before you enter into a long-term lease agreement, it’s important that you do a title search and consult with a local partner on how to draft the contract.
2. Leasing Property Under a Perpetual Lease
These leasehold contracts last for 15 to 50 years and up to 40 years if the land is owned by the state. The name “perpetual lease” derives from the fact that the lease can be extended for 50 years at a time, theoretically into perpetuity.
With this kind of contract, you’re allowed to transfer, sell, or assign the land. You can also develop the land.
Worth mentioning is that you don’t have to register the lease with the Land Office to make the lease valid. But, it’s still recommended that you register the perpetual lease against the title with the Land Office for protection.
3. Set Up a Land-Holding Company
You can also set up a so-called Land Holding Company (LHC) and enter into a joint venture with a local Cambodian citizen.
Keep in mind that you can only own 49% of such an entity, but there are ways to give you control of the company through contractual setups.
This option reduced the risks as security can be added through layers to the shareholder and lender.
At the same time, you’ll also have to pay annual fees to maintain the company, high registration fees, and increased taxes when selling the property.
4. Buying Land With a Cambodian Nominee
The final option is to buy land with the help of a local Cambodian citizen.
This is referred to as a nominee structure and is cheaper and simpler compared to many of the other options. In short, the investor selects a Cambodian citizen to legally own the land as they are only allowed to do so.
A so-called ‘trust agreement’ is then signed where the nominee assures that he or she will hold the land plot. The key here is to work with a credible partner to avoid any unforeseen issues later.
For example, you can be assigned as a loan provider to the nominee, which adds a layer of protection. The documents are then registered at the Land Office and you have to agree to any sales or transfers of the land.
Foreign Property Ownership Regulations
We know that foreign individuals cannot own land in Cambodia and you have a handful of other options to acquire land, as listed above.
Foreign individuals, on the other hand, are only allowed to buy strata title units, which are generally condominium units or strata-title commercial units. One example of projects that has strata-title commercial units is The Peak, for example.
Looking at the foreign ownership quota, Cambodia is comparably generous as foreigners can own up to 70% of the units in a given project. In Thailand, the ratio is 49%/51%, and in Vietnam only 30%/70%, in favor of locals.
Foreigners are also capable of investing in commercial property, as long as you acquire the unit through a company. This is something that you can read more about in my separate article.
Land Titles in Cambodia
There are four different land titles available in Cambodia, including:
- Strata titles
- LMAP
- Soft titles
- Hard titles
Let’s review each one of them briefly.
Strata Titles
As mentioned, strata-titles are commonly used for condominium units, even if a few office buildings have strata-title units in places like Bangkok. Besides, you’ll also find strata-titled commercial units in cities such as Phnom Penh.
Foreigners predominantly buy properties with strata-titles as we are only allowed to buy units with this kind of title.
LMAP
LMAP is an abbreviation for Land Management and Administration Projects and was initiated by the World Bank in 2002. It’s the ‘safest’ option for property owners as its main purpose is to protect property owners thanks to its efficient and transparent records.
Cambodia suffered from land-grabbing previously and the LMAPs have helped to overcome these issues.
Soft Titles / Hard Titles
Hard titles and soft titles differ in the sense that the later ones are only registered on a local level while the first ones are registered and recognized nationally.
Around 70% of all real estate in Cambodia has soft titles and the number goes up to 80% in rural areas.
The benefits of buying land with soft titles are that the process is quicker and you can also avoid the transfer fee of 4%.
Yet, properties with hard titles offer more transparency and protection as you’ll get access to more information about the property and its previous ownerships.
Land Prices in Cambodia
Land prices have tripled in Cambodia from 2000 to 2019 thanks to stronger local purchasing power and increased foreign direct investments (FDI).
One of the reasons why we have seen rapid increases in land prices is also due to the development of land to make space for industrial and commercial activities.
Recently, more and more agricultural land and farm lots have been turned into these land types. Warehouses and factories are constructed on land that was previously unused and used as storage.
Below is an overview of how land prices have changed inside and outside Phnom Penh from 2010 to 2019.
Phnom Penh – City Center
Below you can find the average property prices inside the city of Phnom Penh in the previous years.
Residential Land
- 2019: USD 2,500 / sq.m.
- 2018: USD 2,000 / sq.m.
- 2014: USD 1,500 / sq.m.
- 2009: USD 500 / sq.m.
Commercial Land
- 2019: USD 5,000
- 2018: USD 4,500
- 2014: USD 3,000
- 2009: USD 1,000
Notice the big price difference between residential and commercial land. This gives a good indication of potential price increases when converting land from agricultural/vacant land into commercial land, for example.
Phnom Penh – Outside of the City
Below you can find the average property prices outside of the city center of Phnom Penh in the previous years.
Residential Land
- 2019: USD 100 / sq.m.
- 2018: USD 80 / sq.m.
- 2014: USD 50 / sq.m.
- 2009: USD 10 / sq.m.
Commercial Land
- 2019: USD 300 / sq.m.
- 2018: USD 250 / sq.m.
- 2014: USD 150 / sq.m.
- 2009: USD 30 / sq.m.
Taxes
Keep in mind that the rates can change, it’s important that you confirm the latest applicable rates before you engage in any property transactions.
Transfer Tax
A transfer tax of 4% of the property value is charged for the Title Deeds Transfer. This tax is sometimes referred to as registration tax.
Property Tax
The annual property tax is 0.1% and paid annually. However, the tax is only applicable to the amount of USD 25,000.
Thus, you can deduct USD 25,000 from the total land value before calculating the tax. When the government calculates the tax, they also multiple the taxable value by 80% only.
The tax was imposed to encourage the usage of land.
Unused Land Tax
A tax of unused land of 2% is charged for unused land multiplied by the size of that land area.
Rental Income Tax
The rental income tax is 10% and paid every year.
Capital Gains Tax
A capital gains tax of 20% is paid by corporations and when selling property.
Worth mentioning is that individuals don’t need to pay any capital gains tax.
