In March 2016 the prospect of extending the current leasehold to 99 years has surfaced once again. There are pro and anti lobbies both fervently pushing their agendas and points of few.
As it stands today Thai law states that leases of up 3 years do not need to be registered. If however, either the tenant or landlord wants security for a longer period, they can register the lease on the title deed at the Department of Land and pay a 1% fee.
The current Prayut government has already moved to extend the term allowed under the Leasehold Act from 50 to 99 years, but it has been muted this will only be for government owned land.
Even if the Leasehold Act allowed 99 years for both government and private land, and even if this included residential land the impact on the overall market might be small.
The Pro’s
The idea behind extending the lease term is one of foreign investment. With the current leases at 30 years and no right to own land outright, many foreign investors find potential returns unattractive but more importantly too risky.
However, with the ASEAN Economic Community this point has become more powerful. The goal of becoming a regional hub can only be achieved with foreign investment.
Many investors turn their heads towards Singapore and Malaysia where 99 year leases are available, even Vietnam allows 70 year leases.
Without this possible source of money, the Thai market remains immature, relatively undeveloped and potentially more volatile. If Thailand is to effectively compete for global funds in the AEC era, then 99 year leases could be one way of achieving this.
The Con’s
One main argument against change is a perception that Thailand is not ready for this kind of liberalisation. It is sometimes put down to a Thai fear of foreigners dominating the market, and emotional statements such as Selling the Country are often used.
The fear is that highly liquid foreign investors will seize the opportunity to buy large swathes of the country, effectively disenfranchising the Thai people, depriving them of their birthright and, worst of all, condemning countless Thai farmers to servile roles serving foreign interests with no chance of ending the vicious cycle of poverty.
These are highly emotive and substantial arguments and they need to be addressed before moving forward.
Some concerns have also been raised that landowners and tax authorities will lose out if 99 year agreements are based on current values. However, in countries with experience of long leases the problem has been overcome by including rent reviews every 5 years or so.
Summary
• Thai landowners can gain more income without sacrificing ownership
• Thai developers would be able to deliver higher quality product
• Better access to bank loans for developers and buyers, particularly low-income households
• Gamechanger for attracting foreign investment and developing Thailand as AEC regional hub
• More competitive marketplace
• Reduce corruption related to land ownership and make town planning more efficient
• Some Thai developers/investors may find it difficult to compete for prime land plots
• Fear that low-income Thais, especially farmers, will end up landless
In conclusion it is definitely a good idea if 99 year leases were to be implemented. However, in order to make sure the amendment is used for its intended purpose of encouraging urban property development, rather than allowing massive land grabs, it may be necessary to maintain the restriction of 30 years on agricultural land while allowing 99 years on urban and resort properties such as condos in Pattaya.