11 July 2024

The government’s plan to allow foreigners to own 75% of total condominium units in a project, and also increase the land lease term to 99 years, could leave Prime Minister Srettha Thavisin open to the charge of conflict of interest.

Srettha’s Cabinet has given preliminary approval to a proposal to increase condominium ownership by foreigners from 49 per cent to 75 per cent in a project.

The real estate sector comprising 18 associations had earlier asked the government to help expand foreign ownership in vertical residential units, aimed at boosting the sector that has been suffering from oversupply and declining purchasing power of local people.

Property developers have also long pushed for a change in the law that would allow land lease up to 99 years from the current 30 years and another 30 years for extension of the contract.

Srettha agreed that these changes in the laws could encourage more foreign investors to invest in Thailand.

A conflict of interest?

Srettha was the president and chief executive of Sansiri Plc, one of Thailand’s leading property developers.

Before entering politics last year, he had transferred all his 661 million shares, representing 4.4 per cent of total capital, to his daughter.

Could Srettha risk indictment for policy decisions that could benefit his erstwhile company.

The case bears similarities with the instance of former PM Thaksin Shinawatra, who was alleged to have used a nominee to hold his shares in Shin Corporation while his government changed laws and regulations that benefited his telecom business.

After the 2006 coup, Thaksin was indicted and found guilty of conflict of interest and given a five-year prison sentence.

Though Srettha has no direct vested interest in Sansiri Plc, unlike Thaksin, critics warn of a risk.

“Transferring ownership of shares to his daughter is still the Thavisin family’s interest, and Srettha could face criticism,” said Prinya Thaewanarumitkul, law lecturer at Thammasat University.

The government needs to make the matter transparent by allowing a wide debate on the issue.

They should submit the draft law to Parliament for closer scrutiny, said Prinya.

Some proponents have suggested that the government use an emergency decree to urgently boost the sluggish property market.

Prinya, however, opposes such a shortcut.

The idea of allowing foreigners to lease land for up to 99 years could face strong public opposition, critics have warned.

“This law change is more sensitive as it is close to allowing foreigners to buy land,” said Prinya.

Alternative solutions?

Rather than changing two major laws, it would be much better if the government simplifies the procedure for foreigners to get Thai citizenship, says Prinya.

He points to the crisis of an aged society with the number of newborn babies being lesser than the number of people who have died since 2021.

Who would buy property when Thailand’s population is on a declining trend? he asked.

Many countries are facing the problem of aging or aged societies and some have tried to tide over the problem by giving citizenship to qualified foreigners’ applicants.

The US government is wooing foreigners by issuing green cards before giving them full citizenship.

The US has succeeded in recruiting highly skilled foreigners who are playing an important role in driving the US economy.

European countries also are selecting highly skilled foreigners and providing educational scholarships.

“There are many foreigners who love and want to live in Thailand, and we can choose who meets the qualifications set by us,” he added.  

Will the measures help?

Stanley Kang, former president of the Joint Foreign Chambers of Commerce in Thailand, does not think that the changes in law proposed by the government would encourage more foreigners to buy residential condominium units, as large numbers of residential units are available now.

He also does not see the longer land lease term creating more economic value, as there are many other conditions.

Currently foreign investors receive investment incentives from the Board of Investment of Thailand to buy land for building their manufacturing facility.

“It would also depend on the final details of the new law amendments,” he said.

Regarding offering citizenship to foreigners, Kang said there were no issues with current laws and regulations but the problem lay in the implementation or law enforcement.

“If there is less corruption then it would be more helpful,” Kang added.

The question of public support

The experience of the previous Prayut Chan-o-cha government suggests that public support or opposition would depend on the details of the new measures.

Back in October 2022, Prayut’s Cabinet had approved in principle a proposal submitted by the Interior Ministry to allow foreigners who invest at least 40 million baht to own not more than one rai (0.16 hectare) to build a house.

The move was opposed by the public and opposition politicians, including Pheu Thai Party, for fear of land grabs by foreigners.

A month later, Interior Minister Anupong Paonchinda had to withdraw the proposed draft of that new regulation from the Cabinet.

“This time, if the government wants to allay fears of foreigners competing to buy condominiums, the government should limit locations and provinces where foreigners could buy up to 75 per cent of total units in each project.”

“For example some specific zones in Chonburi, Phuket, or Bangkok, said Vichai Viratkapan, bank inspector and acting director-general of the Real Estate Information Center (REIC), the research arm of the Government Housing Bank.”

“The Thai government may need to assure every Thai that everyone would be able to own a home in the same way that the Singapore government does,” said Vichai.

To circumvent restrictive laws, it is common practice for foreigners who want to buy land and housing to use Thai citizens or companies as nominees, according to Vichai.  

Chinese top buyers of condo units

Transactions of condominium units sold to foreigners in the first quarter this year rose 4.3 per cent year on year to 3,938 units, exceeding the pre-COVID-19 level, according to the REIC.

The value of transactions increased 5.2 per cent to 18 billion baht, totaling 173,007 square meters, up 2.6 per cent over the previous year.

The ratio of foreigners buying residential units edged higher to 16.7 per cent from 15.9 per cent and the value of their transactions rose to 28.6 per cent from 24.3 per cent.  

The top five provinces where foreigners bought condos were: Chonburi – 1,521 units worth 4.2 billion baht; Bangkok – 1,498 units, 10.7 billion; Chiang Mai  – 249 units, 574 million baht; Phuket – 242 units, 1.4 billion baht; and Samut Prakan – 140 units, 392 million baht.  

Chinese nationals were the biggest buyers with 1,596 units worth 7.6 billion baht, followed by buyers from Myanmar – 392 units worth 2.2 billion baht, and Russians with 295 units worth 924 million baht.

Interestingly, condo transactions of Myanmar buyers soared 415.8 per cent year on year, moving up from 25th place in 2021 to second place in the first quarter of this year, said Vichai. 

The REIC also found foreigners showing interest in buying second-hand condo units.

The majority of foreigners — 52.9 per cent — bought condo units worth not more than 3 million baht each; 22.7 per cent bought in the price range of 3.01 million to 5 million baht, and 11.1 per cent bought units in the price range of 5.01 million to 7.5 million baht, according to the REIC. 

By Thai PBS World’s Business Desk