What you need to get your project off the ground in Cambodia

To clear the seemingly endless hurdles of the Cambodian construction process is no easy task. Foreign investment in real estate soared to over $400 million in 2019, according to the National Bank of Cambodia, the greatest share coming from China, Singapore and the United States. Yet despite the continued appeal of the Cambodian market, for real estate developers taking the leap from abroad it’s not often clear where to start.

In recent years, a number of government sub-decrees have been issued to help clarify the rules and regulations around new urban builds, which fall under the key Law on Land Management, Urban Planning and Construction from 1994. Holding a construction permit as well as a developers licence is now integral to the process for those looking into building condominiums and other co-owned structures.

Here at The Room we can help get your vision up and running through tailored step-by-step guidance, ensuring progress is smooth and efficient from beginning to end. Below we have tried to outline, in simple terms, what you should generally expect when planning your real estate project in Cambodia.

What is a construction permit?

Construction permits are legal documents that are required prior to construction. While by law foreigners cannot own land in Cambodia, developers can obtain a long-term lease on the land.

All plans must fall in accordance with the Phnom Penh Master Plan for 2035 (issued in 2015), any other existing zoning plans as well as other general rules on land use. Sub-Decree No. 42 (2015) outlines details such as density and height restrictions, restricted land (agricultural and forest zones etc.) and land zoned for specific functions (residential, commercial, industrial etc.). Other elements are detailed under Sub-Decree No. 38, such as boundaries between buildings, set-backs from the public road, parking spaces and septic tanks.

When do you need a construction permit?

All constructions in cities and towns require construction permits, including reconstructions, expansions, floor additions to the existing building, renovations or structures next to the street which are exposed to public view (for example, hanging advertisement panels and solar panels). Permits are not required for smaller rural areas and other isolated sites (away from protected areas) as well as maintenance and repair works which do not alter the structure or the facade of the building.

Where can you get a permit?

If the planned construction is less than 3,000 m², the permit comes under the authority of the local provincial or municipal administration, where the application must be submitted. Larger projects, greater than 3,000 m², come under the Ministry of Land Management, Urban Planning and Construction. In both cases the application must be signed by the land owner and a registered Cambodian architect.

Some required documents include:

• Official application form in Khmer
• Copy of certificate of immovable property
• Copy of identity card of land owner
• Architectural plan/construction plan
• Comparison study of surrounding buildings/area
• Insurance

This process will normally take between three and six months and once granted building must start within one year.

What is a real estate developers licence?

All businesses that are developing four or more apartments, three or more villas or at least four units in a co-owned property require a licence.

In order to manage the tremendous growth in residential builds in Phnom Penh and beyond in recent years, comprehensive guidelines on obtaining a real estate developers licence were issued by the Ministry of Economics and Finance (MEF) in 2016 under Prakas 965.

No advertising for sales purposes or pre-sale may take place before this licence is granted.

Real estate developer licences fall under two categories, and are issued by the MEF:

Type 1: self-finances the project. No sales allowed during construction period.

Type 2: finances the project through sources such as a foreign reserve fund; loan from banking or financial institutions; or collecting deposits from customers (maximum 1%). Sales are allowed during the construction period.

What are some of the required documents?

• Construction permit
• Development must be under a registered company, not an individual. Name on the licence must match the chairman of the company.
• $500,000 in capital
• Separate developer account, with further oversight and restrictions from the MEF
• Deposit of 2% of the total investment amount of the development to the MEF (to be returned upon official completion of the project with required documents)
• Comprehensive business plan

Selling under both types of licences requires a model unit.

This process will normally take between three and six months.

What is a strata title?

A strata title refers to the ownership of a unit in a co-owned building such as a condominium.

Sub-decree No. 114 (2014) says that the process of converting a singular title to a number of titles covering all the units can start when structural construction work is finished.

What kind of documentation is needed?

• Construction permit
• Letter of closing of construction site (i.e. completion of structural work)
• Architectural plan (including unit details and common area)

This process will normally take between three and six months.

Failure to obtain the correct permits may result in the suspension or demolition of works as well as other legal action.

These guidelines only scratch the surface – for any potential developers in need of assistance, don’t be afraid to reach out with any questions. We’re here to help.