Building a House in Japan: Key Things to Know About

By Jeff Wynkoop

There are a lot of options for those wanting to custom-build a house in Japan, and a lot of hurdles to overcome.

In a previous article, we discussed how much it costs to build a house in Japan. In this post, we will go over some of the basic things you need to consider when having a house custom built in Japan.

Finding Suitable Land

One of the key difficulties is finding suitable land to build on for your new home. Land in Japan is relatively scarce near major city centers, so it tends to be very expensive to buy in cities such as Tokyo and Osaka. Outside of the metropolitan areas however, you may find that construction costs are much more of your total cost than the price of the land. Further, you may have to buy several smaller pieces of land, and go through the process of combining them into one parcel to build on.

You should also be aware of the fact that the land usually has to be worked on prior to a residential construction site being approved by the local authorities. The land may need to be bulldozed and leveled, retaining walls built, trees chopped, etc. in order for the site to be ready to be hooked up to water, gas, and electricity utilities.

Getting land ready to build on

The process of preparing the land is called zousei  (造成) in Japanese. You may also be able to find a site that has already been prepared for construction, called kenchikujoukentsuki tochi (建築条件付土地) . These sites are prepared by big development companies, but if you use one, you will lose total freedom to design your house. The development company will have rules about design, etc., so the neighborhood will retain some commonalities when fully developed.

Getting a ground lease

To save money, you may be able to enter into a long-term ground lease with a landowner for your right to construct and own a building on the land. In this case, you will have to pay a recurring rental fee to the owner over the period of time you want to own the building.

You will still be able to obtain legal registration of your ownership in the building, since registration of ownership in buildings and land are separate assets under the Japanese legal system.

Using a ground lease can be a good way to reduce the total upfront acquisition cost of the land.

In the alternative, it may be cheaper to buy a plot of land with an old house still on the land. In this case, you will need to have the older house destroyed prior to having your site prepared and your dream house constructed on the site.

Who will be managing the construction

There are four options people in Japan usually choose from to have a house built for them. You can

1. Hire an architect’s office (設計事務所 sekkeijimusho) and then have the architect design the building and manage a construction company or general contractor (工務店 koumuten).
2. Begin with the general contractor, and have that firm lead the process.
3. Talk with a big developer (ハウスメーカー hausumeekaa), and let the developer design the house and manage construction.
4. Hire an ‘FC’ (franchise), which is a role that is in between a developer and general contractor, in that an FC arranges to buy materials at scale, and then carries out and directs a local contractor to carry out construction.

Using a big developer can save time since they have many design options, materials, and room layouts to choose from, and they are very experienced in constructing a quality modern home. The more freedom you have to choose, however, the more decisions you have to make, and the easier it is to go over budget.

Some people prefer a general contractor however, because they can develop a personal relationship with the firm, similar to a family doctor.

Using an architect is best for someone who wants a really creative design, and to have another management layer over the construction process. Remember, however, that the more individual or eccentric your home design, the harder it may be to sell to a third party down the road.

Major Regulations and Issues

The following are the the key regulations and issues you should know about when custom building.

• The Floor Area Allowance, also known as FAR (yousekiritsu, 容積率), limits the total amount of floor space (height and area) for any building built on a certain parcel of land. This regulation is meant to limit population density and local roads from becoming overcrowded.
• Building-to-Land Ratio (建蔽率kenpeiritsu) limits the percentage of a parcel of land that may be covered by a building (area only). This regulation makes it harder for fires to spread, and secures sunlight and the flow of air at street level.
• Setback refers to the area in a parcel of land where a building may not be constructed. Roads generally must be at least 4 meters wide (to allow for emergency vehicles to use them), but if the road is less than four meters wide (for example, if it is a very old road), the part of the land that is less than two meters from the center line of the road may not be built on.
• Zoning regulations create 12 types of land use zones in metropolitan areas: three types of industrial zones, two types of commercial zones, and seven types of residential zones. For instance, a landowner may not build a residence in an area of town zoned exclusively for industrial use.
• If a parcel of land does not abut a road for at least 2 meters, legally an owner may not rebuild on the site, even if there is currently a building there.
• As a rule, buildings may not be constructed in Non-Urbanization Areas (shigaika chousei kuiki, 市街化調整区域 ) unless there is special permission by the local regulatory authorities.
• Is there soil pollution at the site? Was there a cleaners or printing shop or fertilizer manufacturer located there in the past? This is something to check for when doing your due diligence.

Timeframe

On average, it takes from three months to a year to finish construction, but this depends how many details you want to customize. Remember, the construction company oftentimes is not in as big a hurry as you are.

Consider whether you may need bridge financing. Bridge financing will be at a higher rate than the permanent loan, and is meant to “bridge” the gap between making a down payment for the land and the time when the home construction is completed.

It is important to be aware of the fact that in most cases, banks will not give out a loan before the home is completed. This is because the bank needs to know the total cost of the house prior to giving a loan. They don’t want part of the loan to be used for other purposes, say buying a car. You may, however, be able to choose to get a loan in installments, but then the repayment period will begin before construction on the house is complete. You may be able to get the option to just pay interest only (no principal) until the construction is finished.

Both of these options can be expensive, but that leads to another important characteristic of having a house custom designed and built for you. Time delays and budget overruns are very common problems.

If you are on a tight budget, it may be impractical to have your own house built. No one can give you a firm budget as to how much the entire process will cost at the time you begin planning to buy the land. Planning is crucial, but being flexible is even more critical.

You may also be interested in: How much does it cost to build a house in Japan?

Top photo: iStock 1275745875