Cambodia Construction Financing Challenges Exposed: A Growing Crisis

The construction industry in Cambodia is facing serious financial hurdles. Developers struggle with funding gaps, rising debt, and supply chain problems. Regulatory inefficiencies and reduced foreign investments have slowed down many projects. Without urgent solutions, the industry could face prolonged stagnation. Let’s find out how to navigate the Cambodia Construction Financing Challenges below!

Cambodia Construction Financing Challenges: Rising Debt

One of the biggest challenges is the growing debt burden. As of September 2024, total debt in the construction and real estate sectors has reached USD 18 billion. This massive financial strain affects developers, homebuyers, and banks.

Homebuyers owe between USD 800 million and USD 900 million in installment payments.
83 residential development companies collectively owe USD 1.5 billion to banks.
Individual borrowers account for another USD 500 million in housing-related debt.

This rising debt has slowed down investments and led to stalled projects. The decline in foreign investment, especially from China since the COVID-19 pandemic, has worsened the situation. Many developers struggle to secure funds to complete their projects. The government is trying to address this issue by coordinating with relevant parties to allow customers who borrowed from borey property owners at high interest rates to transfer this debt to a banking institution at a lower interest rate.

Regulatory Hurdles & Slow Project Approvals

The regulatory environment also poses major challenges. While 3,142 construction projects were approved between January and November 2023, the total number of project undertakings dropped by 20.5% compared to previous years.

Bureaucratic inefficiencies and lengthy approval processes make it more difficult for developers. This is especially true for first-time developers, who need to access financing and commence projects. Kim Kinkesa, CBRE Cambodia Managing Director, noted that building trust and establishing a strong presence in such a competitive environment requires both experience and a proven track record, making it harder for new entrants. The slowdown in project execution further discourages new investments in the sector, contributing to the overall stagnation.

Cambodia Construction Financing Challenges: Supply Chain Disruptions

Another critical issue is the disruption in material supply chains. Delays in material deliveries and reliance on imports have significantly affected construction timelines.

In 2023, the import of construction materials grew by only 4.7%, a sharp decline from the 25.6% growth rate in the previous year. This slowdown has created bottlenecks, increasing costs and extending project deadlines. Without stable access to materials, developers struggle to keep projects on schedule.

Potential Solutions to Cambodia Construction Financing Challenges

To overcome these challenges, industry experts propose several solutions:

Establishing a Special Construction Fund
- A dedicated fund could provide accessible loans through commercial banks.
- This would help developers resume stalled projects and reduce financial risks.
Improving Regulatory Processes
- Streamlining project approvals could attract more investors.
- Faster processing times would ensure smoother project execution.
Boosting Domestic Material Production
- Investing in local production of construction materials can reduce reliance on imports.
- This would enhance supply chain stability and lower costs.

Cambodia’s construction sector faces serious financing challenges, with USD 18 billion in total debt and a decline in investment. Regulatory delays and supply chain issues add to the struggle. However, solutions like a special construction fund, improved regulations, and local material production could help revive the industry. With the right strategies, the country can overcome Cambodia Construction Financing Challenges support sustainable growth in the construction sector.