The Council of Ministers on Friday approved a subdecree that will allow non-Cambodians to own up to 70 percent of condominium buildings under the newly passed foreign ownership law.
The decision marked a slight pull back on a previous proposal sent to the Council of Ministers in June to allow foreigners to own up to 80 percent of a condominium.
Nevertheless property analysts said that 70 percent ownership rights for foreigners would still encourage investment in Cambodia’s property sector, which slowed to a halt during last year’s economic crisis and saw property prices fall by between 40 and 60 percent in the capital.
“It’s approved. The foreigners will have the right to own 70 percent of the building,” said Council of Ministers spokesman Phay Siphan on Friday.
“It’s a balance between the foreigner and the local people.”
Mr Siphan said the subdecree also stipulated that at least 75 percent of all tenants residing in a co-owned building would have to agree upon any major structural changes to the building. The idea behind this decision is to ensure that both foreigners and local property owners “make a compromise” with each other when deciding upon architectural changes to their residence.
In June, Nonn Theany, spokeswoman for the Ministry of Land Management, said ownership rights for foreigners should be as high as 80 percent in order to encourage as much investment as possible in the country
But Ms Theany said that 70 percent ownership rights for foreigners was still ample enough to provide a sizeable boost to the property sector.
“We believe that this will increase investment in this sector,” she said on Friday.
“If you look at other countries in the region…it is more competitive than Thailand,” said Daniel Parkes, country manager for international realtor CB Richard Ellis in Cambodia.
In Thailand foreigners are only allowed to own 49 percent of co-owned building.
“The 30 percent might be a bit of a good news story in terms of securing some of the accommodation for Cambodians,” Mr Parkes said. “Whether it is 70 percent or 80 percent [for foreigners], it doesn’t change the fact that foreigners will be able to get freehold strata titles for a condominium building.”
Mr Parkes added that the decision to have 75 percent of tenants in agreement over any major structural changes was “in line with international norms.”
Under the foreign ownership law, developers who want to sell apartments to foreigners must first register the building at the Ministry of Land Management to be eligible for co-ownership. Once properties are registered, the ministry will then issue deeds to assign ownership for each of the property’s individual units.
It is still to be determined how the application process for acquiring co-ownership status on a building and the necessary property deeds will function.
But Mr Parkes said that this process should be rather simple, with property developers having to simply submit their plans for ownership separation in buildings to the cadastral office, which should then automatically approve it.
He added that the government may need to pass further sub-decrees on the management of common areas within buildings such as lobbies as well as how maintenance fees from tenants are regulated.
Sung Bonna, president and CEO of Bonna Realty Group, said the amount of units within co-owned buildings granted to foreigners was not of major importance.
“The issue is to know how to attract those investors to Cambodia,” he said.
“Even if we have this law…Cambodia is not one of the best or major considerations for oversees investors yet.”
Mr Bonna said that Cambodia still needs more regulations and incentives for investors and the local property market is miniscule in size compared to other regional players such as Singapore and Thailand.
Previous versions of the foreign ownership law reviewed by the Council of Ministers in December stipulated that foreigners could buy only 49 percent of units in co-owned buildings. However, that limit was later removed after calls from the private sector raised fears that the ruling would bring about a dual market within the same building.
The law on foreign ownership allows non-Cambodians to own property above the ground floor in co-owned buildings, as long as the building does not fall within 30 km of the country’s land borders. Foreigners will, however, be allowed to own property inside such border areas if the property is located inside the industrial estates on special economic zones.