The Ultimate Insider by Property Report

I recently had a Q&A with Property Report and am sharing this conversion with my network. Enjoy reading!

How might Srettha Thavisin's real estate background influence his approach to addressing challenges in Thailand's real estate sector?

Birjmohun: Mr. Srettha knows firsthand how to open doors to new markets, in his former position with Sansiri, he and his team have been one of the leading players to take a collaborative approach in International Project Marketing and International Roadshow activities since 2016. Real estate and tourism have a mutually beneficial relationship, with each industry driving the growth of the other. Quality infrastructure and developments are essential for maintaining tourism and creating a positive image of the destination, a key driver for success. Therefore, by creating visa schemes for particular countries of interest, he can additionally stimulate the buyers sentiment for all real estate and hospitality sectors.

From a developer perspective he understands the dynamics and importance of engaging the right targets, he went to through the industry volatilities such as ownerships rights, overseas transactions, high density city development challenges, mortgage rate approval, local absorption rates and change in consumer behavior. Real Estate is an intrinsic part of Thailand’s GDP and forthcoming income streams, this business can elevate the Kingdom to a new benchmark of economic prosperity, create new job opportunities and contribute significantly into the competitiveness level of the Kingdom. ??

Every listed developer has done extensive market research and land bank opportunities in the past decade, among the listed the developers there is also an unwritten code whereby they acquire land in and around each other vicinity, creating new hotspots of urban development. Hopefully his influence will focus more on urban planning and TOD, this will create a foundation for a better future.

What strategies do you expect the Srettha government to employ to boost the sluggish residential market and address supply issues?

Birjmohun: I foresee that he will tackle several dimensions of the real estate sector:

-?????? Support Low-income households that have the aspiration for home ownership, by creating a long term (not one time!) household tax incentives schemes

-?????? Advice the Bank of Thailand to keep mortgage interest rates low

-?????? Engage the provincial authorities to focus more on urban planning and TOD rather than ad-hoc private endeavors

-?????? Create opportunity for foreign home ownership on landed properties

-?????? Discuss the foreign exchange obligatory for foreign buyers

-?????? Create tax specific incentives for the tremendous backlog of condominium over supply

-?????? Take a closer look at re-development opportunities

-?????? Request developers to make payments flexible and provide in-house mortgage support with limited interest obligations

How can the government rebuild confidence among developers and investors following changes in loan-to-value (LTV) limits?

Birjmohun: The implications on changes by the Bank of Thailand are made on a Macro-economic level, this does not always make the situation for the Real Estate sector beneficial – however the government can implement a counter framework by providing significant tax incentives to buyers, like a tax credit scheme that is used in western societies. Secondly, the tax incentives can be greater if the project is ready to move in(backlog), and newly launched or under construction project will belong to another tax ladder. I would like to emphasize that the previous schemes such as exemption of transfer fee under 3mbTHB has limited affect on the buyers sentiment. We have to address structural frameworks on fly by night impromptu initiatives.

Developers should be more independent if it comes to buyer finance, the banks should not be the sole option. More developers should look at providing in-house financing to buyers with no or limited interest rates, whereby the government should support these schemes by providing tax incentives to developers and stimulate. In this scenario, the liability on a default carries less risk because the asset will not be stamped as NPL or NPA, therefore does not become burden for the bank nor the developer. Just look for the next prospect and move on.

For all the above household income need to improve to provide greater economic stability to the citizens. With prices of commodities and daily necessities rising globally, Thailand did not particularly put a long term plan in place to counter this problem. In fact, more inequality has been created since the pandemic. It would be good suggestion of Mr.Settha and his team to take a closer look at Article 17 of the Universal Declaration of Human Rights (UDHR) – 1. Everyone has the right to own property alone as well as in association with others

2. No one shall be arbitrarily deprived of his property

What obstacles could the government face in implementing effective solutions for the real estate sector's challenges?

Birjmohun: High interest rates may discourage buyers from making property purchases

Inflation may lead to increased property prices, making it more challenging for first-time buyers

Other sectors may also request tangible solutions and incentives and will feel discriminated because the Prime Minister has real estate background Challenges in regulatory and urban planning to redirect developers in dedicated areas of interest can receive resistance

Thailand's revenue department recently announced new taxation guidelines that will tax all income from abroad as personal income tax. How might these tax changes impact foreign investors and expatriates who own property in Thailand, and what implications could this have for foreign ownership in the real estate market?

Birjmohun: If we emphasize on the real estate sector in specific, it can have impact on foreign property owners who stay in the country 180 days or more in any tax year and who possess assessable income from work duties or activities conducted abroad or from assets located abroad… with focus on “and”.

The gross majority of the foreign quota in the condominium sector are not being bought by the expatriate community, but rather by seasonal travelers. I do not foresee that this tax revision will have big impact on the gross majority of travelers and future buyers. Yes, there is a portion of foreign investors and retirees that take Thailand as second home, therefore this new law is a contradiction to all the efforts the government has been making on promoting longterm and elite visa’s.

How can industry stakeholders and the government collaborate to improve the real estate market?

Birjmohun: Look at mutual benefit for the society as a whole rather than individual benefits. A reciprocal approach that creates home ownership opportunities for all households. They should implement tactical urbanism as an inclusive way of activating and developing a neighborhood by using temporary, low-cost and scalable interventions. Most industry stakeholders do not look at the “fit for purpose” objective, but rather built on a developer led approach.

The government has to identify the needs in society, and take citizen-led approach to real estate developments using short-term, low-cost, and scalable interventions to catalyze long-term change.

Looking ahead, what other positive outcomes or changes do you anticipate for Thailand's real estate industry under the leadership of Prime Minister Srettha Thavisin, and how might these changes benefit the sector?

Birjmohun: He might look at more governance on sales and marketing activities to raise the competitiveness level of professionals working in this industry and really benchmark them with regional competitors.? Until today there is no accredication or certification for Real Estate Agents and related professions.