Can Foreign Investors Get A Real Estate Loan In Japan?

Oct 23, 2021

Rights of foreigners to purchase property in Japan

Firstly it is important to note that foreign investors in real estate have exactly the same rights as Japanese nationals. In many countries around the world, particularly in Asia, there are restrictions in place that limit the ability of foreigners to own land or property. However, in Japan there are no limitations in place when it comes to purchasing real estate.

In fact, you can purchase real estate as a foreigner even if you do not have a visa that allows you to visit Japan easily!

Foreign investors are subject to the same taxes as Japanese nationals and have the same rights in terms of ownership of land and property. There are no extra taxes and no requirement to go into partnership with a local. You do not require any special type of visa nor do you need to be resident in Japan.

Great, so can I get a loan?

Here is where it can get tricky. Generally speaking banks in Japan will loan freely to Japanese nationals and permanent residents, although usually the lowest interest rates and best terms are reserved for your home (i.e. where you are living) as opposed to a holiday home.

When someone applies for a home mortgage loan in Japan, the bank checks various personal information including annual income and length of employment. With regard to foreigners, the most important question for a bank is whether or not the applicant has permanent residency in Japan.

One of the main reasons for this is that the bank wants to be sure they can collect the mortgage from their customer and if the applicant doesn't reside in Japan then it will be difficult to do so. The assumption is that permanent residents will not up sticks and flee, so it is possible for foreigners who are resident in Japan to get a loan. Restrictions still apply though: you need to be able to speak good enough Japanese to understand the loan documentation and when it comes to investing in resort real estate many banks are not interested - they prefer to loan for homes in towns or cities where they understand the value.

Another important, if seemingly crazy, consideration for banks is that they don't want to loan to "gangsters". This is an actual condition of loans in Japan, to confirm you are not affiliated with any groups responsible for anti-social behaviour. Japanese banks worry that they cannot confirm this is true when it comes to foreigners!

So if I'm not a permanent resident I can't get a loan then?

It will be tricky. As above, most banks require foreigners to have permanent residency in Japan before applying for a property loan. However, more and more financial institutions are becoming increasingly flexible with regard to lending even when it is to people without permanent resident status.

However, it does remain the case that if you want to apply for a home mortgage loan without a permanent residency in Japan, the screening process seems to be more difficult, and there are some points to consider as follows:

Years of residence in Japan: generally you will need to have been living in Japan more than 5 years
Minimum annual income: 2 to 5 million yen or more
Amount of down payment: At least 20% of the property price, or more depending on your workplace and your annual income.
A spouse who is a Japanese national or has a permanent residency in Japan must be the guarantor
Japanese language ability: Are you able to communicate in Japanese without problems and understand the contents of the contract?

If you do not have permanent residency and cannot get a home mortgage loan from a Japanese bank, you can consult with international banks or your home country bank if they have a Japanese branch. However it is worth noting that in general the interest rates are higher than those of local banks and often a larger deposit is required.

Are there any other options?

Of course! In fact there are several.

If you are purchasing real estate for investment purposes, you will need to consider a real estate investment loan, as home mortgage loans are not available.

As with home mortgage loans, many Japanese financial institutions require that you have permanent residency in Japan as a condition for a loan, but this does not mean that you can never get a real estate investment loan if you do not have permanent residency.

If you are a foreigner living in Japan, there are a small number of financial institutions that will give you a loan even if you do not have a permanent residency, as long as you meet the following conditions:

you must be able to provide your own funds
you must have lived in Japan for a certain period of time, and
you must have a certain number of years of employment and annual income.

The screening conditions vary from financial institution to financial institution, so we recommend that you contact them directly.

In most cases, foreign investors who do not reside in Japan have to purchase real estate in cash, although you can of course get a loan in your home country to access the cash. However, there are some foreign financial institutions that offer real estate investment loans. On top of that, if you have a corporation established for real estate investment in Japan, you may be able to use a real estate secured business loan.

Any good banks to contact?

Your best option is to discuss access to finance directly with your trusted real estate agent who may have information on developments that have priority financing available. But in the meantime, here are a few banks to contact with regard to real estate investment loans:

The Tokyo Star Bank, Ltd.

Loan products for customers of Japanese corporations established by foreign investors and Japanese corporations established by foreign nationals with resident status in Japan for the purpose of real estate investment in Japan.
https://www.tokyostarbank.co.jp/hojin/solution/industry/inbound/

Shinsei Investment & Finance Ltd.

Personal loans only for non-residents of Japan who hold a passport issued by the Hong Kong Special Administrative Region Government or Japan and currently reside in Hong Kong.
https://www.shinsei-if.com/en/real-estate/overseas.html

ORIX Bank Corporation

No permanent residency in Japan required. Foreign nationals residing in Japan with an annual income of 7 million or more for the previous year. There are conditions for the property such as structure, area, building age, and use.
http://www.orixbank.co.jp

PRESTIA (SMBC Trust Bank)

No permanent residency in Japan required. Foreign nationals residing in Japan with an annual income of 7 million or more for the previous year. No guarantor required. There are conditions for the property such as structure, area, building age, and use.
https://www.smbctb.co.jp