Media reports citing an unnamed source have suggested that Thailand’s Finance Ministry has been told to focus on developing an amendment to existing property laws that would allow land to be leased for up to 99 years.
And according to Thailand property industry experts contacted by Dot Property Group, this will make the Kingdom more attractive for foreign investors.
An amendment to the 1999 Act on the lease of immoveable property for commercial and Industrial purposes is said to the key to a restructuring process for the debt-ridden State Railway of Thailand (SRT).
Under the reported plan the SRT will transfer some of its land to the Treasury Department who, in exchange, will help clear most debts and help rent its land to the private sector for up to 99 years.
Increasing the length of leasehold agreements would also make some projects more attracting to overseas property buyers and investors.
Media reports also suggested that the Interior Ministry was reported to be concerned about land price manipulation as a result of the amended law, and expressed concern it would give foreigners another incentive to live in Thailand.
That comment alone has sparked intense debate in online forums, with many expatriate netizens suggesting this gives indications that Thailand no longer wants to make living in the Kingdom an easy process. This comes at a time when several neighbouring countries are in the process of relaxing foreign property legislation in the wake of last month’s implementation of the ASEAN Economic Community (AEC).
Several local media reports yesterday that suggested foreigners can already lease land in their own name were not totally accurate.
According to the Department of Land website: “In general, an alien may hire land in Thailand as provided by the Civil and Commercial Code and the contract of hire cannot exceed thirty years thereof. Once the contract comes to an end, it can be renewed, but it must not exceed thirty years from the date of renewal.”
Foreigners are able to lease land in their own name when the purchase is Board of Investment (BOI) approved, or for industrial use only.
Desmond Hughes, Senior Partner at specialist property law firm Hughes Krupica, told Dot Property: “This will affect the nature and scope of investment in commercial and industrial projects in Thailand radically, and supports recent efforts to stimulate Thailand¹s economy.
“Foreign investors will see the pendulum of regulation swinging in their favour, and this will undoubtedly lead to more opportunities arising.”
Hughes added that if this could be applied to the residential property sector then it would give a boost to the economy, further benefitting Thailand.
He added: “Such a proposal would not lead to a takeover of land as the freehold will still be vested in Thais, but the security and length of tenure will be such that investors will be encouraged to invest more and make longer term projections.
“They will also take more risk expecting more reward, and all of that will stimulate the property market which has suffered due to the domestic purchasers having incurred too much household debt.”
Surachet Kongcheep, Associate Director of Research at Colliers International agreed the move is good for Thailand.
He told Dot Property: “This news is very interesting, and will be very attractive for all foreign investors while also increasing the country’s competitiveness.
“Additionally, some big land plots which are owned by organisations such as the State Railway of Thailand and the Crown Property Bureau, as well as other government departments, will likely find it easier to acquire investors to lease their land.”
Khun Suphin Mechuchep, Managing Director of JLL Thailand said that Thailand’s law generally allows owners to lease land for up to 30 years, and in certain sections of Bangkok’s commercial areas the law allows owners to offer land for lease for up to 50 years on a clause that the land is acquired for commercial use only.
She added: “However, mega property development projects on large leasehold land plots owned by state enterprises, such as STR, may require a longer term than 50 years as they need a longer period of time to recover initial investment outlays. For this reason, a 99-year lease term will help make real estate investment in STR’s large prime land plots in Bangkok more interesting.
“Longer lease terms will also make leasing of land more attractive to foreign investors. Participation of foreign investors would be beneficial to land owners, whether they be private individuals/companies or state organisations/quasi-state enterprises, as it would help create a more competitive environment when the land is put up for lease.”
Frank Khan, Executive Director, Head of Residential Department for Knight Frank Thailand said the amendment bill proposed to the cabinet to allow land leasing for up to 99 years – up from 50 years at present, if approved will have a tremendously good effect on the property sector.
He told Dot Property: “This would make Thailand more competitive compared with other regional countries such as Singapore and Malaysia, where leasing terms for foreigners last for 90 years, and Laos which offers 70 years.
Khan also pointed out that a 30-year lease period does affect foreign investors’ decision to renew their contracts due to cautions on possible changes in both price and leasing procedures.
“This will help ease foreign investment in the commercial and industrial markets, and if this extension is applied to the residential markets it will be good for Phuket, Pattaya and Hua Hin where foreigners are looking to invest in villas and resort homes,” he added.
Links to the Department of Land website concerns land lease and purchase by foreigners, as it stands now, are HERE and HERE. Credit to Colliers International for providing these links.