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Land prices, financing snags hold back affordable housing

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Affordable houses built for low-income families and civil servants. PHOTO SUPPLIED

Land prices, financing snags hold back affordable housing

Prime Minister Hun Sen’s latest appeal to real-estate developers to build more affordable homes and improve the economic security of low-income households has been met with enthusiasm, but rising land prices have prompted potential investors to call for government incentives to ensure reasonable profit margins.

The premier was speaking at the close of the Ministry of Land Management, Urban Planning and Construction’s annual meeting, on December 27.

“There’s high demand for affordable housing among civil servants and those who may earn little. We need to resolve the housing issue nationwide, for those with low- or medium-incomes who can’t afford the high going-rates for a home.

“I call on real-estate developers to build more affordable housing for our people,” Hun Sen said.

Of note, an exemption on stamp duty is currently applicable for residential properties valued at less than $70,000, as part of Covid-era incentives to bolster the real estate sector. The stamp duty is a four-per-cent tax levied on the transfer of ownership or the right of possession of immovable property.

Cambodian Valuers and Estate Agents Association (CVEA) president Chrek Soknim welcomes the premier’s call, but told The Post on December 28 that dramatic rises in land prices have prevented most developers from building affordable homes.

“We’d actually be quite delighted to build affordable homes for the people, in step with government policy, but taking into account how expensive land in Phnom Penh has become, developers wouldn’t be able to make a profit on housing projects that target low-income people,” he said.

Still, affordable housing projects could become a viable option for developers if they are provided with land concessions and infrastructure support from the government, including clean water and electricity, Soknim claimed.

He explained that there is very low demand for the existing affordable housing projects, owing to their locations outside of the capital’s more densely-populated areas.

However, he argued, new developments of this type may only be feasible with more government support as well as better access to formal financing among prospective customers.

First Finance Plc, a local microfinance institution (MFI), has signalled its keenness to oblige, reportedly having found backers for its plans to extend access to affordable housing finance to low- or middle-income borrowers.

The MFI has received an approximately $7 million debt financing package from Mauritius-based GuarantCo Ltd, a member of the London-headquartered Private Infrastructure Development Group (PIDG), and the US’ Cargill Financial Services International Inc, GuarantCo noted in a statement dated just “December, 2022”.

The statement said that the transaction “is expected to support around 470 new loans targeted mainly to low- and middle-income households”, and that the overall size of the facility could be increased to around $22 million “over the next two years”, “subject to certain criteria including market conditions”.

By some estimates, some 7.9 million people will be living in urban areas by 2030, up roughly five-sixths from 4.3 million in 2014. To this end, officials in June 2017 announced ambitious plans to meet the demand for some 55,000 affordable new homes each year.

At the time, Minister of Land Management, Urban Planning and Construction Chea Sophara predicted that, by 2030, an estimated 800,000 urban homes will need to be added to the 2015 housing stock to meet the demand of an expected national population of 19 million.


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