The Ministry of Economy and Finance has decided to restrict the number of licences given for construction investment projects and real estate properties in Cambodia in an effort to ensure that projects which are allowed to proceed will be completed successfully.
The general director of the General Department of Financial Industry, Van Mey, told Post Property on Tuesday morning that the Ministry of Economy and Finance is in the process of drafting a law that aims to protect financers by monitoring residential projects to ensure that they are finished on time and do not defraud their investors. They plan to have the law in place by the end of the year.
“We only rolled out the announcement back then, which was a light punishment against them if they had scammed their customers or sold just the units in the project without any plan to actually build any,” he said, adding that the new rules were “just to fine them or confiscate their licence, which is not such a serious punishment”.
According to Mey, the ministry currently requires project owners to deposit 2 percent of their capital investment in a local bank in the event that the project is not completed. But Mey said the government intended to strengthen this rule, keeping the bank deposit requirement but adding on the need for official guarantees from that bank as well as from any partners that the project is being done transparently. For the new law, they have not decided how much an investor needs to deposit, as they are still consulting with private sector stakeholders and adding more elements to the law.
Serey Peung, general manager of Cambodia Angkor Real Estate, said the new rules were a good idea because it would help prevent people from falling victim to scams like the Gold Tower 42 project.
He added that there were companies that acquired loans from banks using their land as collateral. They would then announce the project and start selling future units, using those funds to continue construction. But often, when sales of future units slowed down, the customers who had already paid were left in the lurch.
“We want to see the construction first before the sales. Don’t just announce the sales and start selling because it is very risky,” he said.
Kim Heang, the head of the Cambodian Valuers and Estate Agents Association, stated that the new law has been in the works for almost four years now and would not have any effect on those who adhere to transparent business practices.
“The new law will help reduce the amount of non-physical projects because there used to be companies using their land as collateral at the bank and then announcing their projects for sale, and projects like these are very risky,” he said. “This law is very good for society, while it ensures that only those with real capital can invest in real property projects.”
Okhna Ly Hour, head of the Cambodia Constructors Association, said in the past, there were land plot salesmen who would say the land is near Phnom Penh and very cheap but would decline to mention exactly where it was. The ministry was concerned about the risk, and that is why the new law was drafted, he said, adding that the law was not a restriction, as it was designed to help save people.
“This is the care of the government for the people, and we, the private sector, fully support this intervention,” he said.