Investing in Japanese real estate is an attractive option as it allows foreigners to invest without restrictions while also offering stability and promising future returns.
However, securing the necessary funds for real estate investment can be a significant challenge, and some investors may hesitate due to a lack of personal capital.
One financing option available is obtaining a loan in Japan, but many foreign investors may wonder whether they are eligible for such loans.
In this article, we will explain the key points of real estate investment loan screening in Japan, as well as whether it is possible to obtain a loan without permanent residency.

Process of Real Estate Investment for Foreign Investors in Japan

In Japan, both residents and non-residents, regardless of nationality or permanent residency status, can purchase land and buildings.
The general process for foreign investors to purchase real estate in Japan is as follows:

Property selection
Property viewing and submission of a letter of intent (LOI)
Purchase agreement
Preparation of purchase funds
Settlement
Property title transfer registration
Handover
Filing a report, if required

For more details on purchasing real estate in Japan, please refer to our related articles.

First, search for properties online and, once you find a property of interest, contact a real estate agent to review its details, either in person or online.
Once you decide on a property, submit a letter of intent and proceed with price negotiations. If both the buyer and the seller agree on the terms, a purchase agreement is concluded.
After signing the purchase agreement, the buyer must prepare the necessary funds. On the settlement date, payment is made to the seller, and ownership of the property is transferred, completing the handover.

Additionally, if a non-resident purchases real estate in Japan, they must report the transaction under the Foreign Exchange and Foreign Trade Act (FEFTA).

However, in the following cases, reporting is not required:

The property is acquired for residential use by the non-Cost of Purchasing Real Estate in Japan & Financing Optionsresident buyer, their family members, employees, or other staff. (If the property is used as a vacation home or a second home for short stays, it does not qualify as “residential use” and must be reported.)
The property is acquired by a non-resident conducting non-profit activities in Japan for the purpose of carrying out such activities.
The property is acquired for use as an office for the non-resident buyer.
The property is acquired from another non-resident.

Cost of Purchasing Real Estate in Japan & Financing Options

When purchasing real estate in Japan, buyers must consider not only the property price but also additional costs such as real estate agent fees, registration fees, and stamp duties.
It is advisable to budget 5-10% of the property price for these additional costs.

There are three main financing options:

Paying in full with personal funds
Obtaining a loan from a financial institution in the investor’s home country
Applying for a loan from a Japanese financial institution
If an investor can secure the necessary funds through personal savings or a loan from a financial institution in their home country, they can proceed with the investment without issues.
In such cases, it is common to transfer the funds via international remittance to a Japanese bank account before making payments to the seller.

If obtaining a loan from a home country is not feasible, investors may consider applying for a loan from a Japanese financial institution.
Even foreign investors can obtain loans from Japanese banks.
However, banks typically require applicants to meet specific conditions, such as holding permanent residency or establishing a Japanese corporation, so careful planning is necessary.

Loans for Real Estate in Japan

Japanese financial institutions offer two types of real estate loans: housing loans and real estate investment loans.
Although both are related to real estate financing, they differ significantly, so it is essential to understand the differences.

Housing Loan

A housing loan is a loan intended for the ownership of residential real estate.
It can be used for purchasing or renovating a property, and the maximum loan amount is typically around 5 to 8 times the borrower’s annual income.

Foreigners can apply for a housing loan, but holding permanent residency (PR) is generally required.
Additionally, housing loans are meant for properties where the borrower intends to live, so they cannot be used to purchase investment properties.
If a housing loan is used for an investment property, it may be considered a contract violation, potentially leading to a demand for immediate repayment in full.
Even for foreigners with permanent residency, housing loans cannot be used for investment properties, so caution is necessary.

Real Estate Investment Loan

A real estate investment loan is a loan that can be used to purchase real estate for investment purposes.
It is sometimes referred to as an apartment loan.

The loan limit for a real estate investment loan is often 10 to 20 times the borrower’s annual income, making it possible to secure a larger loan compared to a housing loan.
Additionally, while housing loans cannot be issued to corporations, real estate investment loans can be taken out by corporate entities.

However, investment loans typically have higher interest rates compared to housing loans and tend to have stricter screening requirements.

Foreign nationals can apply for real estate investment loans,
but they must pass the financial institution’s screening process,
and only a limited number of banks offer loans to foreign nationals.

Key Factors in Real Estate Investment Loan Screening

To obtain a real estate investment loan, investors must apply for a loan and pass the lender’s screening process.
Although screening criteria differ by financial institution, the three most important factors are:

Permanent residency status
Personal financial attributes
Property evaluation

Permanent Residency Status

Whether the applicant holds permanent residency has a significant impact on loan approval.
Many financial institutions require permanent residency as a condition for lending, and if the applicant does not have PR, the available options become much more limited.

Some financial institutions do provide loans to foreigners without permanent residency, but they often require applicants to reside in Japan.
If an investor does not have PR and does not reside in Japan, they may find it easier to secure financing from a bank in their home country or rely on personal funds.

Personal Financial Attributes

The applicant’s financial attributes include annual income, employer, and employment history.
Financial institutions assess these factors to determine whether the applicant is creditworthy and how much they can borrow.
While criteria vary between banks, the following conditions generally increase approval chances:

Annual income: A stable and sufficient income
Employer: A stable job with a listed company, major corporation, government agency, or a licensed professional
Employment history: At least one year of continuous employment, although some banks require three years or more
Since repayment is long-term, banks prioritize applicants with stable income.
Even if an applicant has a high income, frequent job changes or short employment history may lead to disadvantages during screening.

Additionally, some financial institutions set specific conditions regarding minimum annual income and employment duration,
so checking the requirements in advance is highly recommended.

Property Evaluation

For real estate investment loans, financial institutions assess the asset value of the property, as the property itself is used as collateral.
In particular, properties with no remaining statutory useful life tend to have little to no collateral value, making loan approval more difficult.
Even if a loan is approved, the repayment period may be shorter, so properties with a long remaining statutory useful life are generally more favorable for loan approval.

Additionally, since loan repayment is primarily based on rental income from the property, the profitability of the investment is a key factor.
When selecting a property, check whether it is in a high-demand area with good location and strong future potential.

Even if an investor meets the personal financial requirements, a loan may still be denied due to issues with the property.
In such cases, re-evaluating and selecting a different property may be a viable solution.

Can Foreigners Obtain a Real Estate Investment Loan Without Permanent Residency?

Financial institutions that provide real estate investment loans to foreigners without permanent residency are limited, but they do exist.
If you do not have permanent residency, it is recommended to search for banks that offer such loans and consult them directly.

However, loan screening for applicants without permanent residency is generally stricter.
Applicants typically need to demonstrate:

Sufficient personal funds
A stable and high annual income
That said, each financial institution has different lending requirements, so even Japanese citizens must apply to find out if they qualify.
It is best to consult financial institutions first to understand the available options.

Japanese Banks That Offer Loans to Foreigners Without Permanent Residency

Below are some Japanese banks that offer real estate investment loans without permanent residency:

Can Non-Residents Obtain a Real Estate Investment Loan in Japan?

As mentioned earlier, even if a foreign investor resides in Japan, obtaining a real estate investment loan without permanent residency is extremely difficult.
For non-residents, securing a loan in Japan for property investment is even more challenging.

One possible solution is to own or establish a Japanese corporation,
as some financial institutions may offer real estate investment loans to Japanese companies owned by foreign nationals.

However, simply creating a corporation is not enough—investors must meet various financial and legal requirements.
This approach is complex and requires careful planning.

If you are considering investing in Japanese real estate, we encourage you to consult wagaya Japan for professional guidance.

Conclusion

Foreigners can also take out a Japanese real estate investment loan, but the hurdles are higher if you use a specific scheme or do not have permanent residency.
Also note that regardless of whether you have permanent residency or not, you must clear certain annual income, length of employment, and property valuation.
When using a Japanese real estate investment loan, it is important to check the conditions and consult with the financial institution.
We recommend that you have a reliable real estate agent with extensive experience in real estate transactions provide support.