Options for Investing in Lease Properties

• 11 January 2019
• Property Focus
• 2163 Views

Most of the condominium units in Cambodia nowadays are offered on a freehold basis. However, you will occasionally come across different types of projects that are offered on leasehold if the option of freehold is not available, such as buying land.

Properties located on land that is not available for freehold, such as land that is owned by individuals and private entities who do not wish to sell their land, are offered for lease on a leasehold basis. The rent of the land is paid up front, but the building remains under the ownership of the developer, or they transfer the ownership of the building to the owner at the end of the lease period. When the contract is about to be renewed, the leasing rates can be based on the open market value at the time of renewal.

Foreigners in Cambodia can own properties on the first floor or higher, or up to 70% of any one building. This only applies to buildings with a strata title. Alternatively, if these foreigners are partnered in a Cambodian legal entity, then they can own up to 49% of the private property. Therefore, as long as you own the property with a Cambodian national, then you can own any type of property you desire. However, for foreign individuals looking to buy a property which is restricted by freehold, then the only option left is to lease a property on a long-term basis. Leases could be granted for up to 50 years in accordance with the Land Law. As a foreigner, it is also possible, when discussing the deal with the landlord, to put a renewable clause in the agreement.

This can also apply to condominium projects for leasing to foreigners. In Cambodia, most of the condominium projects target buyers are foreigners. Foreigners can own property in Cambodia but there are restrictions. In this scenario it may get complicated when the foreign freehold quota reaches 70%. Developers, in turn, can offer a long-term lease for the remaining units to these foreign buyers, if there is such market demand for these foreigners to purchase units for investment. Fortunately, this has not happened yet in the Cambodian market.

Afterall, most foreign investors also like to invest a great deal of money in the hope of value appreciation of the property, therefore, leasing a property on a long-term basis may not be a very good option. However, depending on what you intend to do with the property, leasing a property on a long-term basis is definitely still worth considering.

Because of the available option of long-term leases, this makes leasing similar to a freehold property but only for a limited time. Investors should understand leasehold ownership in relation to the law and see how best it can be implemented with their investments.

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