demand increases for affordable housing
According to the government’s 2014 National Housing Policy, by 2030 the Cambodian population will need an extra 1.1m houses to meet the growing residential demand of the country.
However, with most developers focusing on middle class and luxury developments and as income disparity between the urban rich and rural poor persists, affordable housing provides untapped niche opportunities for developers and investors.
EuroCham recently hosted a Breakfast Talk as part of their Sustainability Series 2018, focusing on the topic of affordable housing. Invited speakers included Mr. IENG Sotheara, a Co-founder and Managing Director of Arakawa Co., Ltd, Arakawa presently develops and manages Phnom Penh's well-known luxury riverfront Bellevue Serviced Apartments in Chroy Changva and is also currently developing a huge affordable housing project called Arakawa Residence in Sangkat Toeuk Thla, Phnom Penh to meet the new housing demand.
Also speaking was Ms. Lang Sok, the Sustainable Development Goals Focal Point for UNDP Cambodia and also a Private Sector Engagement Specialist bridging business to Sustainable Development. She explained that in order for Cambodia to meet its Sustainable Development Goals (SDG) achievements by 2030, more than a million “affordable” homes need to be created, which is 55,000 each year. However, current developers have only announced 10,000 units under construction.
It is currently estimated that 8.8 million low-income workers can afford a small house with no financing. A further 9.8 million low-income workers do not have access to decent housing. Cambodia’s minimum wage in 2018 is $170 per month, and the UNDP recommends that housing costs should be no more than 30% of a household’s wages.
In Cambodia, affordable housing is defined as costing less than $30,000 per unit for households with less than $500 per month. Some countries provide affordable housing as government-owned buildings with subsidized rent for qualified residents. However, Cambodia’s need is being filled by private developers, who offer low-price units and low-cost
loans for low and middle-income households to purchase titles.
For example, the Arakawa Residence has 2,000 units from $28,000. With a 10% down payment, the remaining purchase amount can be financed with a 1% bank fee at 8% interest. They also encourage buyers to maintain a life insurance policy, so in the event of an untimely death, the loan is paid, and the family doesn’t have the added burden of worrying about their home.
Mr. IENG Sotheara explained that proper designing of a development project allows affordable housing to be feasible. At Arakawa, shops are located on the ground floor which cover the cost of maintenance. Units on upper floors can also be sold at a higher price.
Several developers have revealed their plan to build housing for low and middle-income earners. Among them, Tycoon Rithy Sear launched his project of $100 million low-income housing development in Kandal province. His company WorldBridge Land has cooperated with the Singapore-based construction company Straits Construction Group to build 2,296 two-story townhouses in Takhmao City situated about 18 kilometers south of the capital Phnom Penh.
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