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Slow progress on affordable housing

An artist’s rendering of residential towers to be built during the first phase of Arakawa’s affordable-housing project in the capital’s Sen Sok district. Photo supplied
An artist’s rendering of residential towers to be built during the first phase of Arakawa’s affordable-housing project in the capital’s Sen Sok district. Photo supplied

Slow progress on affordable housing

An affordable- housing initiative announced by the government last year aims at providing tens of thousands of new homes to limited-income families, but the plan has received a cool response from the private developers it was hoped would lead the way.

With private developers focused almost entirely on building residences for the upper-middle and luxury markets, the government is trying to shift some of their efforts towards providing simple homes for limited-income families, especially in rapidly expanding urban areas.

Last year, the government announced its first affordable housing initiative, which aims at filling the glaring gap in homes priced under $30,000 that are suitable for Cambodians earning from $200 to $400 per month.
Chea Sophara, Minister of Land Management, Urban Planning and Construction, said in June 2017 that 800,000 low-cost urban homes must be built and added to the Kingdom’s 2015 housing stock to meet demand as the national population swells to 19 million by 2030. He said the government was working to establish affordable housing prices, as well as tax and regulatory incentives that would encourage the private sector to shoulder the task.

While initiative requires the construction of nearly 55,000 new homes a year, the response from private developers has been limited, with less than 10,000 units announced.
To date, only three affordable housing projects have received the government’s nod of approval, which qualifies them for tax incentives, regulatory support and state assistance in the form of infrastructure such as roads, electricity and water networks.

The first project, Worldbridge Homes, is a $60 million affordable-housing development occupying 24 hectares on a total 45 hectares of land in Saang district of Kandal province. Announced in January 2017, the project will see the construction of 2,297 two-storey flats priced between $25,000 and $30,000.

“This price bracket is still affordable for civil servants and low-income families earning less than $500 dollar a month,” according to Sear Rithy, chairman of Worldbridge Group, the developer behind the project. “For this project, we basically want to help the government help people obtain proper houses. If we were focused just on profit, we would stick to building condos and commercial centres.”
Rithy said families whose monthly income does not exceed $500 per month are eligible to purchase the low-cost homes, though the primary target is government officials who are married with kids but due to their low salaries and pensions are unable to afford a home within market value.

He said more than 500 families have purchased homes since sales kicked off three months ago.

“We have not yet received a list of names for civil servants eligible for this project, so we have not sold any units to them yet,” he noted. “Now we are waiting for the government to provide the list and once we get those names, we will start selling houses to them.”

Yuk Sothirith, general manager of Worldbridge Homes, said the government has assisted in developing the infrastructure for the project and construction of the units is scheduled to start later this year.
“Most of the infrastructure has been completed and we will begin building the houses in two or three months,” he said. “After this project, the company will consider building another [affordable housing] project with support from the government.”

 A model house for Worldbridge Group’s affordable-housing project. Photo supplied
A model house for Worldbridge Group’s affordable-housing project. Photo supplied

The second government-backed affordable-housing project is a development by Bun Ches Group, which inked a memorandum of understanding with the government in March 2017 to develop an $88 million residential project on 82 hectares in Ponhea Leu district of Kandal province.

The project will comprise a total of 5,340 units priced from $23,500 to $24,800 each – designed to be affordable for civil servants, members of the armed forces and low- and middle-income citizens. Buyers will be required to put down a 30 percent deposit, with payments of less than $200 a month.

Bun Ches, the company’s eponymous chairman, said about 60 percent of the project’s infrastructure is already in place and sales will kick off after Khmer New Year. He said most developers are unwilling to participate in affordable-housing schemes because of their low profitability. Demand, however, is strong.

“We decided to build an affordable-housing project even though the return on investment is lower than that of high-end residential projects because we can sell the units faster thanks to the higher demand on low-cost homes in Cambodia,” he said. “Moreover, we want to help our society and limited-income people because if we don’t, they will not have a suitable home to live in.”

A concept drawing of an affordable-housing scheme developed by Bun Ches Group. Photo supplied
A concept drawing of an affordable-housing scheme developed by Bun Ches Group. Photo supplied

The third and latest government-backed affordable-housing project was announced by Japanese real estate investment company Arakawa in November 2017. Arakawa Residence will be a $70 million condominium complex on 1.4 hectares of land in the capital’s Sen Sok district.

Alex Yasumoto, CEO of Arakawa, said during the groundbreaking ceremony last year that about $40 million would be spent during the first phase of the project, with an additional $30 million invested in the second. Phase I comprises 10 tightly spaced buildings with a total of 2,000 condo units, with prices ranging from $20,000 to $30,000.

The company has not provided details on Phase II, and could not be reached for comment.

Arakawa is also the developer behind the 21-storey multipurpose tower set to replace Phnom Penh’s iconic White Building, which was one of earliest attempts to provide affordable housing for the capital’s urban residents. Built in 1963 on 24 hectares of prime riverfront land, the low-rise apartment block had fallen into disrepair for decades before a demolition crew levelled it last August.

While initially Arakawa had offered to reserve five floors in the new development for families displaced by the demolition, the offer was quietly withdrawn last year in lieu of a compensation settlement.

Soeung Saran, executive director of Sahmakum Teang Tnaut (STT), a local NGO working to promote land and housing rights of urban poor communities, said even with three government-backed affordable-housing projects in the pipeline there remains a serious nationwide shortage of suitable housing for low-income citizens.

While he praised the government’s initiative to address the issue by encouraging private sector involvement, he said developers will need stronger incentives to fill the supply gap.

“If the initiative is to succeed the government will need to dangle more incentives in front of private developers to get them to build affordable housing for low-income citizens and civil servants,” he said. “At the same time, private developers should choose to help society by building more affordable homes.”

Saran said local and international developers are keen to build high-end residential projects because of the high profit margin involved, so the government should find ways to make affordable housing more comparable in terms of profit. He suggested deepening the tax incentives, regulatory assistance and infrastructure offered to developers, warning that the consequences of failing to get the private sector on board could be dire.

“Without more private developers getting involved in affordable housing projects, it is highly likely that the national housing policy will fail to respond to the fast-growing urban population,” he said. “And that could lead to a housing crisis.”

Officials at the Ministry of Land Management, Urban Planning and Construction referred all questions on affordable housing to ministry spokesman Seng Lot, who repeatedly said he was tied up in meetings and unable to respond.

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