Cambodia: More trust companies take part in property market

Registered trust companies are being increasingly seen as the “new instrument” in the real estate market in Cambodia while the trust sector is still young and needs further promotion in terms of its potential and specific roles in the interaction between developers and foreign investors, officials said.

Four firms and 34 individuals have been registered as trustees with the Trust Regulator (TR) of Cambodia and most of them have been assigned to manage property or assets for their respective trustors in financial, public, commerce and private trusts in Cambodia, the officials said.

Sok Dara, director-general of TR told Khmer Times that all trustees — both entities and individuals that include those who are holding over 300 trusts in various industries including in real estate and 17 managed by entity trustees — are still in the process of full registration with the regulator.

“The role of trustees will help foster inflow of investment in all sectors of the economy and society including foreign investment by building trust and reducing risks of capital flow as they have professional knowledge, skills and experiences that stay in line with enacted laws and regulations,” Dara said.

Developers of landed properties have been expanding their market share to international buyers by working with trust companies in Cambodia as Cambodian laws do not allow foreigners to buy land, but they can buy non-landed properties such as condominiums and offices, the officials told Khmer Times.

Kinkesa Kim, associate director of research and consulting services at the foreign real estate services firm CBRE Cambodia said at least 12 trust companies registered with the regulator have been taking part in the landed property market expansion in Cambodia, while the trust sector is still new for the country.

“Also we have seen a lot of emerging activities of trust companies into landed property … I’ve seen these companies have come as a new instrument for property developers who are offering high quality of products opened up for international buyers,” said Kinkesa, who was also one of the panellists who presented the real estate market updates for the second half 2022 yesterday.

However, the expert told this newspaper that very few of those trust companies have some experience in providing facilitation and trust services to foreign investors, while the rest are still young in their operations to assist those buyers to invest in land and borey on behalf as the sector has just emerged over the last few years.

Foreign investors mostly are more interested in investing in landed properties or land because the market price of land generally grows faster than other categories of properties, said Kinkesa, adding that the price of land in Phnom Penh area mostly rises 7-15 percent per year, while that outside Phnom Penh increases at least 20-30 percent a year.

Kinseka added that trust companies can help facilitate the legal procedures for foreigners to invest the money, especially in landed properties because the constitution of Cambodia states that only Cambodian nationals have the right to be owners of landed properties.

“As it is still new, I think most of the foreign investors have not been informed well about trust in our country such as specific benefits and the annual service charge. So, both trust companies themselves and developers, especially borey companies should work together to promote their services together in order to showcase that they can help foreign investors,” she said.

Landed properties include land itself for development, division as lots for sale, private person’s land, borey houses or vacation houses and land for industrial purposes, Kinseka explained, adding that trust companies should expose themselves to foreign investors and land developers should promote land options that are profitable from investment to those investors.

“That’s why we have seen that trust companies will open more opportunities for foreign investors to own or buy such properties legally by using trust services provided by trustees who use their names on behalf of foreigners to manage their properties, which will build more confidence for foreigners,” said.

Trust regulator of Cambodia and Housing Development Association of Cambodia (HDAC) recently agreed to work together to build confidence among investors in the construction, residential and condominium sectors in the Kingdom.

Huy Vanna, secretary-general of HADC, told Khmer Times that both institutions will work together to disseminate trust among their members and this will have a positive impact on housing development projects.

Trust in Cambodia is divided into four categories as commercial, social, personal and public trusts. The trustee of a trust licensed by the government is authorised to manage assets or properties provided by a person to another person based on a letter or enacted regulations in Cambodia.

Trust is different from legal services because lawyers are not authorised to hold and manage assets, while trustees have legal rights to administer properties on behalf of property owners depending on the responsibility awarded to them.