FOREIGN PROPERTY OWNERSHIP (LEASE)
Government considers longer leasehold terms
Source: Bangkokpost may 15, 2008
The government is considering allowing greater foreign ownership in property firms and extending leasehold periods beyond 30 years to stimulate the business, according to Finance Minister Surapong Suebwonglee.
The amendment would stimulate market segments that have been hit by sluggish demand, he said yesterday.
''This has been discussed quite seriously over the past two to three months. We need to think about the percentage of shareholding and leasing access compared with the number of years. The crisis that we have had in the past two years led us to think and look at a new paradigm,'' he said at an investor forum held by Euromoney.
Dr Surapong said the government would consider new rules on leasing more on par with the region. The government has also abandoned a controversial proposed change to the Foreign Business Act, which tightened the definition of foreign ownership to promote foreign direct investment, he added.
Longlom Bunnag, the chairman of the real estate agency Jones Lang LaSalle (Thailand), said property related to tourism and recreation was expected to benefit the most from any changes because of high demand.
''Existing laws allow foreigners to secure 50-year leaseholds in Bangkok's red zone, which is the commercial area such as on Sathon Road. ... I think Phuket, Samui and Pattaya may be in the government's sights for changes in regulations to benefit villas, resorts and long-stay travellers,'' he said.
Mr Longlom said the idea could improve Thailand's competitiveness, since many countries now offered longer leaseholds _ for instance, 50 years in China and Hong Kong and 99 years in Singapore. ''Thailand has the shortest eligible period for lease contracts.''
Issara Boonyoung, vice-president of Housing Business Association, disagreed with the idea of allowing foreigners to freely conduct transactions related to exchange of properties because it could restrict housing access for Thais.
''Thai people have lower purchasing power than foreigners. If the government allows foreigners to sell or buy freely, there will be no land left for Thais,'' he said.
Foreign ownership should have conditions and limitations, he said. For example, the government should continue protecting land for agricultural purposes due to its low prices, otherwise the country may lose most of its land to foreigners.
Regarding the increase in the foreign quota in condominiums from 49%, the government should limit the size of land plots to prevent developers from using legal loopholes to register townhouses as condo units, Mr Issara said.
However, Assoc Prof Manop Bhongsadadt of Chulalongkorn University said the issue was ''very sensitive'' and unlikely to survive the three readings required in Parliament to change the law.
It would be easier to extend leasehold periods from the current 30 years to 90 years as in the UK, he said. ''It will turn illegal transactions as in Phuket and Samui into legal transactions. The government is likely to collect more taxes.''
Mr Issara also agreed that extended leaseholds would create transparency and prevent the use of nominees. However, he said longer leaseholds and higher foreign quotas in condominiums should be allowed only in specific areas.
Opinion (samuiforsale)
Q. How serious must we see these ideas considered by the government as claimed by the Finance Minister Surapong Suebwonglee?
A. It is far too early to say that these plans are realistic or even to speak about 'the government is considering longer leasehold periods'. It would be more relevant if these ideas would be more concrete and proposed to the Parliament. Part of such a speech is of course aimed at his foreign audience and to take away some of the fear among foreign investors for a planned stricter law enforcement and amendments of the Foreign Busienss Act as planned by the previous military installed govenrment.
Q. Can we expect longer leasehold terms and greater foreign ownership in property firms in the short term?
A. No, not likely. We could maybe see a separate act or regulation in the future allowing longer leasehold terms for foreigners, but such an act or regulation will certainly also have limitations (similar to specific commercial leases for industry and commerce). This will likely require a minimum investment by the foreigner and will only be allowed in certain areas and maybe only in approved housing development projects. It will certainly not be a general change of the law. The maximum 30 year term in the 'Hire of Property' section in the Civil and Commercial Code will not change. This will have too many complications and this is not realistic to expect.
Also the greater foreign ownership in property firms are unlikely to happen and not realistic in this stage. It is like assoc prof Manop Bhongsadadt of Chulalongkorn University said, it is a sensitive issue and unlikely to survive the three readings required in Parliament to change the law. For both ideas a change of the law is required and this is unlikely to happen.
Q. What will be the effect of minister Surapong Suebwonglee's remarks?
A. It will probably create some optimism with the foreign investors who visited the forum held by Euromoney and it will be used for marketing purposes by the property professionals, however, nothing has been proposed to the Parliament yet and it is unlikely to expect any real changes. If we would see longer leasehold terms for foreign property investors this would certainly help the property sector in the resort areas of Thailand which have been hit by sluggish demand since the May 2006 Land Office guidelines issued by the Thaksin government to prevent the use of front companies by foreigners and the proposed amendments of the Foreign Business Act by the military installed government.
As it is now a foreigner may hire land in Thailand as provided by the Civil and Commercial Code and a contract of hire cannot exceed thirty years.
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