New Boost for Investment in Thailand: Relaxation of Real Estate Law Planned!
The Thai Ministry of the Interior has been commissioned to examine the implementation of new regulations. In addition to an extension of rental and leasehold rights from 30 to 99 years, majority foreign ownership of up to 75% of residential properties is also intended to be possible in the future. The aim of the regulations is to boost Thailand’s economy and to create more opportunities to encourage investment in Thailand.
The first proposed amendment concerns the extension of the maximum permitted rental period and has far-reaching consequences. Both Thai and foreign tenants can benefit from the new regulation of Thailand’s real estate law. However, a lease term of more than 30 years would be of particular interest to foreign investors for several reasons:
Firstly, a longer lease term offers longer usability of constructed buildings on leased land. If a new contract cannot be concluded after 30 years – for instance if the heirs of the original owner have other plans for the land – the leased property must be put on hold and loses value for the constructor. Buildings that have been set up on third-party land are only secure for the duration of the lease.
On the other hand, the lease term is important for the provision of collateral for bank loans. Banks only consider the building as collateral without a discount if the lease term is around 90 years or longer.
In addition, investors interested in real estate would be less tempted to enter tempting purchase constellations via nominees. In the private sector, real estate contracts could now also be concluded for a term that would certainly exceed the tenant’s lifetime.
However, the second planned, equally interesting innovation will only affect very few parties:
Under Thai real estate law, foreigners are allowed to purchase apartments in so-called condominiums, under the condition that the majority of the living space remains in Thai ownership. This is intended to prevent Thais from being outvoted at a property owners’ meeting. According to the cabinet’s proposal, the maximum quota for foreigners is to be increased from 49% to 75%. However, the voting rights for foreigners are to remain below half. How this will be implemented in practice is still questionable.
The proposals were submitted by the cabinet and are not legally binding. It remains to be confirmed whether the measures to promote foreign investment will be implemented.
The Western-minded law firm in Bangkok, Sanet Legal & Accountancy, also supports you with investment in Thailand. Make an appointment here for a free initial consultation.