Rising Debt Concerns in Cambodia’s Real Estate Sector

• 16 December 2024
• Construction Focus
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In a recent roundtable discussion titled “The Debt Situation in Cambodia,” held by the Real Estate and Mortgage Regulatory Authority, significant financial concerns were raised regarding the escalating housing debt in the country. Mr Chou Vannak, the authority’s Director General, revealed that home buyers currently owe around USD 800-USD 900 million in instalment payments through licensed real estate agents, contributing to a total housing debt nearing USD 1 billion. This alarming figure underscores the financial strain placed on potential homeowners amid a challenging economic climate.

Further highlighting the gravity of the situation, Mr Vannak disclosed that 83 residential development companies had accumulated debts with banks totalling approximately USD 1.5 billion. Additionally, individual borrowers face debts of around USD 500 million, culminating in an outstanding housing-related debt of about USD 2 billion. This precarious financial landscape impacts home buyers and places immense pressure on property developers.

Data presented during the discussion also indicated that the overall debt in Cambodia’s construction and real estate sectors soared to over 18 billion VND (around USD 4.5 million) as of September 2024, as the National Bank of Cambodia reported. This growing debt has wider implications for the economy, particularly for personal and business loan segments.

Mr. Kong Chhayleng, founder and director of HRTS CONSULTING, shed light on alarming personal debt figures, noting that Cambodians currently grapple with approximately USD 50 billion in personal loans, along with USD 7 billion in business loans. This amounts to roughly USD 57 billion owed to banks and microfinance institutions. It is crucial to note that this figure excludes informal debts that the Cambodian Banking System does not capture.

The financial struggle is further highlighted by statistics revealing an increase in delinquency rates, with 7.5% of debts being over 30 days late and nearly 6% overdue for more than 90 days. These figures signal escalating financial distress among borrowers, prompting urgent discussions on effective solutions.

As Cambodia navigates through these rising debt challenges, experts underscore the need for a concerted approach to develop strategies that alleviate the financial burden on individuals and foster a more stable economic environment. Solutions may include improving access to financial education, better loan management practices, and potential regulatory reforms to enhance transparency within the lending institutions. The call for action is clear, as the welfare of countless households hangs in the balance amidst rising debt levels.

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