The National Assembly yesterday adopted the draft law on foreign property ownership, allowing non-Cambodians to own property above the ground floor in co-owned buildings.
Of the 96 lawmakers present at the Assembly, 85 voted to pass the law without any change to the draft text.
“This law provides social, economic and judicial benefits and integrates Cambodia into the regional and international economy,” Minister of Land Management Im Chhun Lim told the Assembly yesterday. “This law will also encourage more luxury and high-rise buildings.”
After approval by the Senate, the law is to take effect a day after it is signed by King Norodom Sihamoni.
Previous versions of the law reviewed by the Council of Ministers before its submission to the Assembly in December stipulated that only 49 percent of the total units in a co-owned building could be purchased by foreigners, a clause that actors in the private sector said could cause developers to serve two separate markets within the individual buildings.
Developers who want to sell apartments to foreigners must register the buildings at the Ministry of Land Management first to be eligible for co-ownership, according to the law adopted yesterday.
Sek Setha, undersecretary of state at the Ministry of Land Management, said the government is drafting a sub-decree to determine the share of units foreigners will be able to possess inside co-owned buildings.
“It could be more than 49 percent of the building,” Mr Setha said by telephone yesterday, declining to elaborate further on the share that will be made available to foreigners.
Industry analysts and investors largely welcomed the new law yesterday, including the decision to omit limitations on units open to purchase by foreigners.
“This is a positive, significant change,” said Mathew Rendall, a partner at Sciaroni & Associates and a member of a government-private sector working group on real estate policy. “It makes the law workable.”
Mr Rendall said that devising this part of the law at the sub-decree level would provide the government with more flexibility.
“It means it will be very easy when trying to change from time to time,” he said. The government “will be more able to respond quickly to the market position.”
Still, the ability to change ownership rights for foreigners could work against foreigners if the government one day chooses to restrict access, Mr Rendall said.
“But I can’t imagine them doing it,” he added.
Eliminating the limit on the share of co-owned buildings owned by foreigners will also avoid creating a dual economy inside apartment blocks and give developers the opportunity to market their projects more specifically toward foreigners.
“Psychologically, now they can say we will be able to market our property to a foreign property base,” said Mr Rendall. “This will have a decisive impact.”
However, not everyone supported leaving the percentage of foreign ownership open.
Sung Bonna, president of Bonna Realty Group, said he was skeptical of foreigners’ having rights to property beyond the mark of 49 percent.
“I think it was clever to limit [foreign ownership] to 49 percent,” he said. “It keeps the power with the locals.”
Analysts say the passing of the foreign ownership law may encourage developers into pushing ahead with projects that came to a grinding halt during the course of the global financial crisis.
Sari, marketing manager for Indonesian firm YLP Group, which is building the Grand Phnom Penh International City project to the northwest of central Phnom Penh, said it was still too early to tell if foreign property buyers would take advantage of the new law. Like many Indonesians, Ms Sari goes by only one name.
Grand Phnom Penh International City, which is due for completion in the next five years, has to date only put its villas up for sale and most of the demand is coming from Cambodian nationals, Ms Sari said.
She admitted, however, that the project would consider marketing itself to a foreign audience in light of the new law.
Grand Phnom Penh International City will include nine, 16-story towers fitted with roughly 100 apartments each.
“It will be good for the market to stimulate demand,” said Tan Hong Kiat, country manager for the global realtor Knight Frank. “It could encourage more developers to focus more on a foreign base rather than local demand.”
“Right now you have plenty projects that are priced very high but the demand just isn’t there,” he added.
Mr Kiat said that developers should not fall into the trap of trying to appeal uniquely to foreign investors with much of the demand within the property market still coming from domestic customers.
“You should also consider the people of Cambodia,” he said, adding that it was still uncertain how the law would help create demand from foreigners in Cambodia.
