Chou Vannak, director-general of the Real Estate Business and Pawnshop Regulator (RPR), speaks at a roundtable discussion on "The Debt Situation in Cambodia" on December 4. Hin Pisei
The construction and real estate sectors in Cambodia experienced nearly two decades of strong growth before a downturn began in early 2020 due to the global economic impacts of the Covid-19 pandemic. Authorities have reported that the total debt in the country’s construction and real estate sectors has reached approximately $18 billion.
Chou Vannak, director-general of the Real Estate Business and Pawnshop Regulator (RPR), highlighted the crucial role these sectors played in the country’s economic growth before the pandemic during a roundtable discussion titled "The Debt Situation in Cambodia", hosted by the Cambodian Academy of Sciences on December 4.
Vannak noted that annual growth exceeded 7%, with booming construction activity and property transactions alongside rising incomes, which fuelled demand for housing and business premises.
He explained that as demand increased, construction companies, investors and financial institutions (FIs) expanded their operations. Banks provided loans to property developers and individuals seeking to own a home, contributing to the sector's rapid development.
"According to the National Bank of Cambodia [NBC], as of September 2024, debt in the construction and real estate sectors has reached $18.4 billion," he stated.
Focusing on the residential sector, Vannak revealed that developers who borrowed under personal and corporate names accounted for approximately $2 billion in debt. Additionally, individuals who borrowed from banks to repay developers for residential properties added another $1 billion to the total debt.
Breaking down the figures further, he noted that 83 companies that borrowed under personal names accumulated around $1.5 billion of debt, while corporate borrowers totalled close to $600 million. Informal loan repayments between home buyers and developers were estimated at approximately $1 billion.
Sam Soknoeun, president of the Global Real Estate Association and chairman of the Board of SAM SN Group, told The Post on December 5 that the majority of loans recorded by FIs were issued during the period of strong growth in the construction and real estate sectors, prior to the pandemic.
He said that FIs actively provided loans to developers, investors and citizens seeking funds to purchase homes at that time.
He explained that the substantial loan provisions during this period were driven by the sector’s robust performance, which significantly contributed to national economic growth.
"Debt in the construction and real estate sector does not necessarily indicate trouble," Soknoeun said. "Before FIs provide loans to individuals or companies, they always conduct thorough studies on factors such as the location of the property, market conditions, the applicants’ cash flow, repayment capacity and other considerations."
Cambodia's construction sector experienced rapid growth prior to the emergence of Covid-19. Post Staff
Soknoeun noted that, based on his observations, most of these loans were issued before the pandemic. Over the past three to four years, however, he said there has been a noticeable decline in the number of loans provided by FIs to the construction and real estate sectors.
Hong Vanak, an economist at the Royal Academy of Cambodia, remarked that the term "debt", regardless of its context, is generally not a positive indicator.
He stressed the need for authorities and relevant stakeholders to collaborate on solutions that generate income opportunities for citizens, enabling them to cover living expenses and repay their debts.
He added that the government is actively implementing strategies to attract investors, draw in tourists and encourage greater public investment.
“Those in debt have a responsibility to repay their creditors. However, the government can assist by creating job opportunities and working to improve the overall national economic performance,” Vanak stated.
According to the Ministry of Land Management, Urban Planning and Construction, from 2000 to July 2024, the government issued permits for 66,978 construction projects nationwide. These developments span an area of over 194.3 million square metres, with an estimated total investment of approximately $77.7 billion.
