On June 20th, the Thai Cabinet sent a letter to the Ministry of Interior, proposing a series of amendments to real estate policies and urging the Ministry to study these suggestions promptly. The proposals include extending the lease period from 30 years to 99 years to attract more long-term investments and increasing the foreign ownership quota for condominiums in areas like Bangkok's CBD, Phuket, and Pattaya to 75% to meet the growing foreign demand and support market growth.
These proposals come with specific restrictions, such as:
1. Regional Restrictions for Condominium Purchases: The initial pilot areas include Bangkok, Phuket, and Pattaya.
2. Project Area Limitations: When opening 75% of a project's units to foreign buyers, the project area must not exceed 5 rai.
3. Voting Rights Restrictions: Foreign corporate entities' voting rights are limited to 49%, requiring foreigners to relinquish voting rights to avoid issues of project governance dominance by foreign entities.
4. Regulatory Flexibility: Allowing local regulations to be enacted, preventing transactions on foundational projects, agricultural land, or military security zones.
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These proposals have sparked widespread discussion in Thailand. Proponents argue that these policies could effectively stimulate the real estate market and attract more foreign investment. Prasert Taedulyasatit, President of the Thai Condominium Association, noted that similar legal adjustments were made during the 1997 economic crisis, allowing a higher proportion of foreign condominium ownership, indicating that the current proposals are not unprecedented.
During the tenure of former Prime Minister Prayut Chan-o-cha in 2022, the Cabinet proposed allowing foreigners to purchase up to 1 rai of land for residential purposes, but this proposal was withdrawn due to opposition. The current government's suggestion to expand foreign condominium ownership quotas aims to support the real estate market amid weak domestic demand. Compared to foreign demand, Thailand's real estate market has become an attractive sector for foreign investment. In the first quarter of this year, the number of condominiums purchased by foreigners reached a six-year high, even surpassing pre-pandemic levels.
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Peerapong Jaroon-ek, Honorary President of the Thai Condominium Association, stated that legislative changes might take one to two years to pass and take effect. He believes that extending the lease period to 99 years and increasing foreign condominium ownership would significantly boost the real estate market. The market currently faces a high bank loan rejection rate of 50% to 60% and declining purchasing power. Without policy intervention, the Thai real estate market could shrink by 15% to 20% in 2024. Extending the lease period would make urban land more accessible, reduce development costs, make urban properties more affordable for Thais, and encourage banks to approve loans. This would also provide foreigners with long-term residence options, enhancing their confidence and willingness to invest in Thailand.
Prime Minister Srettha Thavisin stated that to ensure Thai condominium owners can continue to control property management, the proposed changes to foreign ownership quotas would not come with an increase in voting rights. The voting rights ratio between foreign and Thai shareholders would remain at 49% to 51%. Foreign owners who purchase condominiums after the 49% quota is filled can own and reside in their units but will not have voting rights in project decisions requiring collective owner votes.
While the policy adjustments may have positive effects, some argue that increasing the foreign condominium purchase quota may have a limited impact on Thailand's real estate market or economy. Praphinleeya Phuengkhuankhan, Interim Residential Sales Manager at CBRE Thailand, noted that only a few condominium projects in Bangkok are close to the 49% foreign ownership quota. Typically, condominium projects with high foreign ownership quotas are developed by foreign developers with established customer bases abroad, targeting those customers. Given the limited number of projects developed by foreign developers, increasing the foreign ownership quota to 75% might have a minimal impact on the overall market and economy, as foreign buyer demand for individual projects is not high.
