Despite revisions to proposed law on housing development financing, developers say it will still hurt the struggling sector
PROPOSED amendments to a long-stalled prakas, or edict, on housing-development financing have drawn criticism from local developers who claim it will make it "impossible" for them to complete projects.
The proposed amendments, which Ministry of Finance Undersecretary of State Ngy Tayi said were agreed at a meeting with developers Monday, is to be sent to Finance Minister Keat Chhon for ratification.
A financial edict was meant to come into force September 30 but was stalled amid an outcry from developers, particularly those from South Korea.
Ngy Tayi told the Post following Monday's meeting that "most" developers present supported the amendments, which removed requirements on large, financially sound developers to comply with some of the more controversial aspects of the initial prakas.
These included a deposit of 2 percent of total project costs in a ministry account at the central bank and a housing development account at any commercial bank into which buyers would make down payments on units bought before construction was completed.
Under the terms of the prakas, developers would need approval from the Finance Ministry to access the accounts. At the time, Shinwoo Kim, Korean Legal Counsel at Sewha Cambodia Law Group, which represented several large Korean developers, told the Post that the requirement would make it impossible for foreign developers.
Ngy Tayi said the changes meant developers who had enough capital to complete projects would now be exempt.
"Only developers who have no capital or not enough capital, and thus have to collect money from customers to complete construction, will be required to deposit 2 percent at the central bank," he said. "When we make sure that they have enough money to construct, the licence will be issued for them."
However, Kong Vansophy, general manager of the US$1 million Dream Town development in Dangkor district, said Tuesday that the proposed modification still left local developers in a hole as they relied on sales for finance.
"For large projects from foreign investors, it may be no problem ... but for local developers like us, it is still difficult because if we borrow money from the bank [as proof of financial soundness] for the development licence, we have to pay high interest rates," he said.
Chhean Dara, manager of the $30 million Young's Commercial Centre and Resort on the Chroy Changvar pensinsula, said the proposed amendment was good for rich developers, but difficult for poor developers.
"In fact, we have money to build the shopping mall, but not 100 percent of our capital, so we have to collect some money from customers to continue construction," he said.
Ngy Tayi said the prakas needed to be signed off by Finance Minister Keat Chhon before it could take effect. "It will be issued by the end of this year, at the latest," he said.
Lee Suck, general manager of Korean developer Nuri D&C De Castle declined to comment Tuesday, as did Kim Tae Yun, assistant to the manager at Yon Woo Cambodia Co, devloper of Gold Tower 42 in Phnom Penh.
Ros Monin, managing partner at Sewha-Cambodia Law Group, said it no longer represented clients on the issue and referred inquiries to the Real Estate Developers' Association of Cambodia which said Tuesday it was not ready to comment.
Additional Reporting By Nathan Green