The Ministry of Economy and Finance has drafted a law to regulate housing projects in the Kingdom, in an attempt to clamp down on illegal construction and instil public and investor confidence in the property market.
The Housing Development Law would, among other requirements, obligate developers to deposit a sum equivalent to the value of the project in a Cambodia-based commercial bank, as well as submit regular construction progress reports to the government, according to a copy of the draft law obtained by the Post.
“This law is very important to the construction and real estate sector here. It will pave the way to greater transparency in the market,” said Lao Tip Seiha, construction department director at the Ministry of Land Management Urban Planning and Construction and member of the inter-ministerial working group for establishing the Housing Development Law.
“We drafted this law in response to the increasing development of the Kingdom’s construction sector,” he said, adding that the law is slated for implementation in the third quarter of 2012. Although details regarding development classification were not highlighted within the draft law, Lao Tip Seiha told the Post that the law would not apply to projects comprising less than four apartments, four units and three villas.
While the sector has experienced reasonable recovery from the economic downturn, some victims were claimed, such as the South Korean-funded Gold Tower 42 and Camko City, which both stand incomplete.
The implementation of the Housing Development Law, drafted on October 13, is expected to quell the failure of further projects, according to Cheng Kheng, managing director of Cambodia Property Limited.
“Some developers have a good idea for a project, but they don’t have the money to complete it, and as a result fail and leave without informing officials. This is why we want to see this law enforced to prevent such things happening,” he said.
A number of penalties, including fines ranging from US$1,250 to $5,000 and imprisonment of up to six months, would be imposed on developers which do not adhere to the law.
However, some industry experts believe the distribution of such penalties is unlikely.
“It shouldn’t get to the point of penalties. The stigma alone of being penalised or going to court should be enough to deter developers from not following the law,” CBRE country manager Daniel Parkes told the Post, adding that one of the most significant factors of the proposed law would be the involvement of the banking sector.
“We will see the banking sector gain greater responsibility [in the property market], as the law requires developers to open a Housing Development Account with a bank in Cambodia, yet it could be a responsibility it perhaps never asked for.”
However, ACLEDA Bank CEO and president In Channy said that proposal would add no great burden on the banks, but would in fact generate further customers. “Although banks would hold the account for the developer, it would be the government’s responsibility to monitor the progress of the development,” he said.
While the increase in business would be a welcomed boost to the banking sector, In Channy stressed that the law was still in the draft stages and is yet to be finalised.