Cambodia Investment Review
EuroCham Cambodia has unveiled the Real Estate & Construction Chapter of its highly-anticipated 2023 White Book, providing 11 policy recommendations for Cambodia’s real estate and construction sector – one of the Kingdom’s economic pillars. This unveiling follows a comprehensive review and consultation process and responds to the profound industry shifts induced by the Covid-19 pandemic, market oversupply and now rising interest rates.
Michel Cassagnes, Chairman of the EuroCham Real Estate & Construction Committee, highlighted the exhaustive process of formulating the papers recommendations, involving in-depth interviews with committee members to understand policy issues. Notably, he emphasized the innovative approach that the committee took in response to the industry disruptions caused by the pandemic, including the addition of an extra pillar alongside real estate and construction pillars and seven awareness-spreading webinars.
Significant events marked 2022 as a year of recovery for the industry, including the exclusive CEO Dinner and the Tall Building Forum. Further, the committee’s collaboration with the UNIDO’s country office and the MEF’s Project Management Unit on a master plan for transforming Preah Sihanouk province into a Special Economic Zone underscored EuroCham’s proactive role in the sector’s revitalization.
Reflecting on the Royal Government’s advancements in legal infrastructure, including the Law on Construction and the drafting of a Construction Code, the 2023 White Book emphasizes these steps as pivotal to establishing clear construction and management standards. These efforts, coupled with the sector’s resilience and recovery from the Covid-19 disruption, paint a promising picture for 2023.
Broad range of policy recommendations
The chapter offers a broad range of policy recommendations, encompassing building co-ownership, hazardous materials, and zonal planning. Among the issues, the lack of standardized property measurements was underscored as a significant impediment to market transparency and efficiency, urging the adoption of international standards such as those from the International Property Measurement Standards Coalition (IPMSC).
Furthermore, the paper urges stronger financial regulations in alignment with ASEAN Member States, advising the Cambodian government to increase the minimum capital requirement for residential development projects to balance consumer protection with development-friendly policy.
The chapter also highlights the need for a clear zoning plan, noting its absence as a source of uncertainty for developers and a potential driver of suboptimal infrastructure development. As such, it recommends adopting a zoning system that provides specific permissions and prohibitions within the sector to curb land value speculation and facilitate well-planned communities.
Cassagnes praised the Cambodian market’s openness to European products and services, expressing gratitude for the government’s receptiveness to past recommendations. “We are committed to fostering a healthy dialogue with the Royal Government and stakeholders to ensure mutual benefits and win-win scenarios,” he said, expressing optimism about the impact of the recommendations on the continued development and growth of Cambodia’s real estate and construction sector.
Addressing the need for clarity
Other highlighted issues in the white paper include the ambiguity surrounding co-ownership rights in private units within buildings constructed before the 2010 enactment of Sub-Decree No. 126. This ambiguity has resulted in a legal gray area and significant maintenance and investment challenges for older buildings, notably in Phnom Penh. EuroCham Cambodia has therefore recommended clarifying the process for owners to convert their properties into private units within co-owned buildings.
Addressing the unusual practice of disallowing private ownership of parking spaces within co-owned buildings, the white paper urges the Cambodian government to align with international practice by allowing developers to treat parking spaces as private units. Such amendments to Sub-Decree No. 126 would potentially attract more property buyers and alleviate traffic congestion.
The paper also addresses the need for clarity on property transfer processes and advocates for digitizing the land registry and property transfer processes. Digitization could provide a significant boost to Cambodia’s real estate market by enhancing transparency, speeding up transactions, and increasing investor confidence. It could also serve as an effective deterrent against land fraud and property disputes. The White Book suggests that Cambodia could look to successful models in other ASEAN countries that have already made considerable strides in digitization.
A structured, transparent, and accountable industry
The discussion around the hazardous materials regulation indicated the need for stricter legislation. The White Book urged the authorities to establish clear guidelines for the storage, handling, and disposal of hazardous materials to ensure worker safety and environmental protection.
In terms of zoning, the White Book identified the need for robust, comprehensive zoning laws. It highlighted the absence of such legislation as a source of conflict and confusion in the sector, which often leads to sub-optimal land use. Clear zoning laws would provide predictability, enabling developers to plan more effectively and contribute to balanced urban growth.
Another major focus was the enforcement of regulations. While acknowledging the progress made in the legal framework, the report noted that regulatory enforcement remains a challenge. This inconsistency often leads to delays in project approvals, undermines investor confidence, and poses potential safety risks.
As the Cambodian real estate and construction sector continues to grow, it is expected that these proposed reforms will help to shape a more structured, transparent, and accountable industry. The recommendations outlined in the chapter, according to Cassagnes, were designed not only to address the existing challenges but also to foster growth and stability within the sector.