A few more Japanese Real estate tricks

Today, I will share with you a few more rules regarding the Japanese real estate and some of the tricks to work with them.

  1. A) First let me explain the few rules of Japanese real estate.

1- First is the zoning. In Japan, especially in big historical cities, area are divided in various categories restricting what can be built where. I will depends on what is already in the area, the easiness to access it (train/road) and plain old political horse trading (not to say corruption, like in every country, really…) at the time of the zoning decision. More on that in the following link. You may also find this document interesting.

Different zones also have different ratio of what can be built.

Those ratio are 2-fold.

2- The first one is the 建ぺい率 (Kenpei-ritsu) or the maximum building footprint to land ratio. A rate for 60% for example means that for a 100m2 land plot, the maximum building size, at ground level cannot exceed 60m2.

3- The 2nd one is the 容積率 (youseki-ritsu) or the volume to land ratio (total building size, all floor included) to the land plot size. A rate of 200% for example means that for a 100m2 land plot, the maximum living area, all floor included, will have not to exceed 200m2.

If you combine the 2 above rates and you try to maximize the build-up on that 100m2 plot of land, you will therefore have a 3 floors building of 60m2 each floor, totalling 180m2. If you really want to optimize, you may add a 4th floor of 20m2 and a huge terrace of 40m2. Indeed, terraces, balconies and external navigating area between apartments (as opposed to an internal corridor) are not counted in those limits.

4- An additional factor before you building construction is approved is that the  new structure should not create too much shadow for the neighbouring buildings. I am not an expert on that yet, as it is a bit complicated and I am having a hard time finding resources in English on the internet on that point.

5- Another factor is that your land plot should have a sufficient part adjacent to a “statutory” road. A statutory road is more than 2m wide on its full length (to allow a fire fighting truck to go through it). You land plot should also have a minimum 2m of continuous connection to that statutory road, otherwise you would need a special authorization to build on it, something that is not easy to do, especially as a foreigner. It also mean that an existing structure on a land plot without a 2m+ access to a statutory road cannot be rebuilt if destroyed. More information here. Such building usually sell for much cheaper than a normal structure for the following reasons:

  • High risk of not being able to rebuild. In a country where the life expectancy of a structure is 40-70 years (as mentioned here), this is a potentially big problem.
  • Impossibility to use that building/land as collateral for a loan.
  • Impossibility for a buyer to get a loan from a bank to buy such property (meaning the buyer needs to purchase cash, greatly limiting the pool of candidates).
  1. B) Now some of the tricks to circumvent some of those issues:

1- Floors with less than 1.40m for roof heights do not count in the volume to land ratio, providing that all other rules are respected. A popular way to increase the potential building size of a land plot is therefore to add small lofts to each small rental unit built in the building. The idea being that the tenant would put his/her bed here (remember that Japanese mostly uses futons and low height beds). Such bed would then not clutter the room below it (the living room) and such a living room would have quite a nice volume as well.

2- For building not adjacent to a statutory road, if you manage later to purchase a neighbouring plot which itself connect to the statutory road, then you will be able to redevelop your initial plot if you manage the new plot so that it gives access to the road to the initial one. The ideal way is just to combine both plots in one and rebuild something bigger.

There are other ways to have the rules changed in your favour, but it usually requires political connections and the like so not for us foreigners…