The government is under pressure after the cabinet approved a bill that allows foreigners to own land if they invest here, a policy that has been widely derided as "selling off" the country.
The measure allows foreigners who obtain a long-term resident visa to buy up to one rai of land to build a house under the condition that they invest at least 40 million baht in the country for at least three years.
Foreigners eligible for the scheme comprise four groups: wealthy global citizens, wealthy pensioners, those who want to work from Thailand, and highly skilled professionals or specialists.
The land must be located in Bangkok, the Pattaya municipality or any municipal area specified as a residential zone, while the scheme is valid for only five years.
In the views of property developers, consultants and key business leaders, the new bill might benefit the economy, but restrictions are necessary to prevent speculation and abuse of the scheme.
DEVELOPERS UPBEAT
Peerapong Jaroon-ek, president of the Thai Condominium Association, said the scheme will boost both the property market and the economy as the purchasing power of eligible foreigners is high.
"We estimate spending of around 80 million baht from a foreign family during a 10-year stay with a long-term resident visa," he said. "That amount can increase GDP growth and be a new source of income for the country."
The property sector, which has slowed since the pandemic, in part because of the lack of Chinese buyers, should resume to the pre-pandemic level of 450 billion baht per year, said Mr Peerapong.
The segment that will benefit from the scheme is units priced 10-20 million baht and above, he said.
Vichai Viratkapan, acting director-general of the Real Estate Information Center, said the scheme can stimulate the economy and investment. It will create new demand from wealthy people, said Mr Vichai.
"In the first phase, the positive impact from the scheme on the property sector may be slight as it takes time to promote," he said. "Foreigners applying for the scheme will need to prepare many things, particularly for the permission process."
RESTRICTIONS A MUST
Last Friday, the Lands Department clarified regulations of the scheme, stating the existing rules related to land ownership by foreigners were suitable, though some conditions should be amended.
"If eligible foreigners exercise their permission to buy one rai and they resell some or the entire property, they cannot ask for permission again even if they have an additional investment," said the department.
Mr Vichai also suggested the scheme be temporary. It should also specify a minimum period of ownership to prevent speculation and property bubbles, as well as restrict the minimum price range to prevent overlapping with affordably priced housing for most Thai buyers.
"Taxes and fees for foreign buyers should be higher than for locals, while there should be a regulation for property transactions made by foreign buyers, particularly when they want to resell," he said.
Aliwassa Pathnadabutr, chairwoman of property consultant CBRE Thailand, said the intention behind the proposal is to attract new long-term residents who can bring fresh investment and revenue to Thailand.
Yet there are legitimate concerns about the potential for speculation and abuse of the scheme, she said.
"Restricting buyers to residential land within registered housing estate juristic person areas and enforcing the 49% ownership quota used for condos is the most effective way to safeguard against speculation," said Ms Aliwassa.
"Such restrictions may allay the concerns of locals and create acceptance for the scheme."
She said an alternative is to allow longer land lease terms of up to 50 or 70 years, in common with many neighbouring countries. This might be a more palatable solution than allowing freehold ownership of land.
ON THE TABLE
Frank Khan, executive director and head of residential at property consultant Knight Frank Thailand, said there are three benefits from the scheme, all of which will generate income for the country.
"The first is everything will be on the table. Foreigners do not need to set up a Thai firm to buy a house," he said. "The scheme will also draw foreign investment and the country will generate income from taxes and spending during their stay."
Mr Khan said a minimum investment of 40 million baht is too small. The minimum should be 60 million baht if Thailand wants to attract wealthy foreigners.
"The scheme is good economically," he said. "But it should be allowed in specific zones such as Bangkok's outskirts or neighbouring provinces so that foreigners cannot scoop up land in the central business district."
Phattarachai Taweewong, director of research and communication at property consultant Colliers International Thailand, said the scheme is a sensitive issue for many Thais, even if it does draw foreign investment.
"Without the scheme, many foreigners still bought a house through nominee owners or Thai companies," he said.
Mr Phattarachai said foreign demand stimulated by the scheme will definitely drive up prices of houses and land until they are unaffordable for many locals because the targeted foreigners have higher purchasing power.
He said foreign property ownership is allowed in many developed countries such as the US, the UK and Japan. However, these countries collect many taxes at a high rate, such as land and building, common area, property management, inheritance, stamp duty, capital gains and city planning.
Economies with restrictions on foreign land ownership such as China, New Zealand, Australia, Singapore and Malaysia limit the unit number, minimum prices and areas.
The most common factor for all countries that allow foreign land ownership is a high rate of taxation, said Mr Phattarachai.
"Thailand should collect taxes from foreigners at a rate that is at least double that imposed on Thais to prevent speculation," he said. "There should also be regulations for property transactions to minimise the impact on locals."
SCREENING NEEDED
Nonarit Bisonyabut, research fellow at Thailand Development Research Institute, said he supports the government's plan to allow foreigners to own residential land in Thailand because it could attract rich or talented people to live here.
The government should screen them and thoroughly check their backgrounds first before giving foreigners permits to prevent "shady" money from purchasing land in Thailand, said Mr Nonarit.
Authorities should also set quotas or limits on the number of plots foreigners can buy per year to allay public concern that they are gobbling up the country's land, he said.
CLARIFICATION REQUIRED
Tanit Sorat, vice-chairman of the Employers' Confederation of Thai Trade and Industry, said it is unlikely the proposal will lead to the government "selling off" the country's land.
He said the government must clarify the purposes of the new ministerial regulations, giving people a more thorough explanation.
"The objective of the proposals to stimulate the economy is relatively broad. If the country is desperate for money from abroad, the government has to elaborate the amount of money it really needs. The condition requiring foreigners to invest at least 40 million baht is considered too small a sum for rich people," said Mr Tanit.
"If we need foreign money, why not require an investment of at least US$5 million for five years? If the government wants to revitalise the real estate sector, it must state clearly in the regulations foreigners are allowed to buy a house with land in housing developments only to avoid land speculation."
The cabinet resolution stated the land slated for foreign ownership should be located in Bangkok, the Pattaya area and municipalities. He said the term "municipalities" could mean areas spanning the whole country, which could result in land purchases by foreigners scattered nationwide.
"If we allow foreigners to buy land in the provinces, the country may be headed for trouble involving land speculation, as young people there may be unable to afford land because of higher prices," said Mr Tanit.
PROPER BOOSTER
Using land ownership as an economic incentive is well-intentioned, but it may not be the best approach to stimulate the economy, said Supant Mongkolsuthree, chief of the economic team of the Thai Sang Thai Party. A better promotion would be sales of condos and houses to foreigners, he said.
Allowing foreigners to buy one rai of land in return for investment of 40 million baht in Thai property, securities or funds may not find many takers, as there are many other options for investment in Thailand that promise better returns, said Mr Supant, also former chairman of the Federation of Thai Industries (FTI).
The government should focus more on property sales by launching incentive programmes that encourage more foreigners to buy houses from Thai real estate developers, he said.
"In the Hua Hin resort district and Phuket, some wealthy foreigners paid for houses worth up to hundreds of millions of baht," said Mr Supant.
"Their spending did not stop there. They bought furniture and decorated their gardens. This caused more money to circulate in the economy, benefiting other industries related to real estate and having far-reaching effects into the future when they have to change furniture or repair houses."
The money they spend can create a multiplier effect of many times in Thailand, increase employment and eventually help the domestic economy, he said.
However, if the government remains firm on its plan to stimulate investment via the land ownership proposal, it needs to issue strict measures to regulate land buying and holding, said Mr Supant. Fees charged for land purchases by foreigners must be higher than those paid by Thais to avoid land speculation, he said, adding land ownership transfers must be banned for five years after purchase.
Kriengkrai Thiennukul, chairman of the FTI, is aware of the concern over the proposal, but said the government still has time to adjust rules and conditions because the proposal is being scrutinised by the Council of State, the state's legal advisory body.
Opponents of the proposal should not jump to conclusions nor view the government as "not loving the nation", he said.
Other countries adopted similar policies to draw foreigners, especially skilled workers, to develop the know-how of their younger workers, said Mr Kriengkrai.
"We should not rush to judge the government. We have yet to see the conclusion," he said.
Lamonphet Apisitniran
