Cambodia’s residential developers are struggling as the government announced measures to support the country’s construction sector and housing projects, explaining that the uncertainty of the global economy and ongoing financial hardship has raised concerns for Cambodia’s economic growth.
The Ministry of Economic and Finance issued a statement on April 12, extending tax pre-payment deadlines. Licensed residential developers owing below $1 million in tax payments have between 12 months to 24 months and developers owing more than $1 million now have between 24 months to 36 months.
The capital gains tax will also be lifted for all licensed housing developers until the end of 2024. The government already provided an exemption during the COVID-19 pandemic to stabilize the sector, which is a major engine to support economic growth.
While welcoming the government’s measures, Kim Heang, the president of the regional arm of US-based real estate firm Keller William Cambodia and CEO of Khmer Real Estate Co Ltd., said it could be just a small contribution to help the sector.
“If possible, the government should provide loans [via state banks] for stalled housing projects since private banks are cautious in lending in this situation,” he said.
Heang, who also develops residential projects in Kandal province’s Kean Svay district and Phnom Penh, said the property sector is now in crisis.
“We have entered the fourth year of the global crisis caused by Covid-19 and the war in Ukraine, so we need more time for the sector to recover,” he said.
The government also provided an exemption on registration tax for the property value below $70,000 or equal until the end of 2024, and encouraged financial institutions to volunteer to prepare loan restructuring for customers who are struggling to make payments for their property.
However, Kimheang said this seems not effective as most homes developed by licensed developers cost over $70,000 already.
“If we look at it [the measures] for a moment, it’s good, but if we look at it in a little more detail, it is just a small help because we can hardly find a home below $ 70,000,” he said.
Sales staff at the Borey New World in Phnom Penh’s Prek Pnov district told CamboJA that sales have dropped since the onset of the pandemic, declining to share a specific percentage, but said that the company has no plans to build a new project yet.
Another sales staff at Borey Lim Cheang Hak in Chbar Ampov district also said there had been a drop in sales.
“It depends on people’s revenue, if the economy falls, home sales will also be affected,” the Borey Lim Cheang Hak employee said.
A new ADB report shows that Cambodia’s construction recovered more slowly than expected as demand from foreign buyers declined, dragging down investment in the construction business. Cambodia’s economy is projected to accelerate this year with estimated growth rates of 5.5% and 6% in 2024.
The Ministry of Economic and Finance said it will establish a mechanism to monitor and evaluate the situation of the construction and property sector in order to introduce more specific measures.
Meas Soksensan, spokesperson for the Ministry of Economy and Finance, could not be reached for comment.
The government approved 4,276 construction projects in 2022, collectively valued at nearly $3 billion, according to a Ministry of Land Management report.
The report stated that more than 10,000 homes were developed by borey owners under 39 projects with an investment value of $563 million.
But more than 1,000 buildings in Sihanoukville have been abandoned for more than two years, according to Sihanoukville provincial authorities.
Cambodia’s construction industry employs approximately 250,000 workers, many having relocated to Phnom Penh from rural provinces.