What are the different types of property tenure and ownership?

There are two main categories of land ownership rights in Japan – freehold and leasehold.

Freehold (Shoyuken)

Shoyuken is the most common and preferred type of land ownership where the owner has absolute ownership of the land underneath the building. In Japan, land and buildings are treated separately.

Leasehold

Surface rights (Chijoken)
Land is leased for a fixed term, and owners of the building and units own the right to transfer ownership without landowner’s approval. Surface lease rights are more commonly seen in leasehold apartments built in recent years.

Right to lease (Chinshakuken)
Land is leased but owners of the buildings and units must attain landowner’s approval before they can transfer ownership or sublease to other tenants. This type of ownership is commonly found in detached houses.

Can foreigners purchase real estate in Japan?

There is no restriction on the purchase or sales of real estate in Japan by foreign investors. Permanent residency status is not required to purchase, own, or sell real estate.

Can foreign investors take up financing?

In general, foreigners are not able to take a loan from a bank in Japan. To be considered for a mortgage loan, applicants must be currently residing in Japan; receiving regular income from a Japan-based company; purchasing the property for their own residence only, and, or have a Japanese spouse.

At the moment, only 2 banks in Tokyo offer loans to foreign individuals. More Singapore banks are beginning to provide Tokyo property financing.

What kind of insurance are required?

Fire insurance is optional to home and apartment owners. However, banks usually require the buyer to take out fire insurance before applying for a mortgage. Earthquake insurance is an additional option on top of fire insurance. Earthquake insurance cannot be purchased on its own – it must be added to a fire insurance plan.

The premium for a typical 20 sqm studio apartment in Shinjuku, with fire insurance coverage up to ¥3,000,000, and earthquake insurance coverage up to ¥1,600,000, is approximately ¥30,000 (for 20 years of fire insurance and 5 years of earthquake insurance).