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Thailand’s Planned Leasehold Law Reform Poised To Make Local Property Market More Investor-Friendly

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Thailand is looking to implement fresh property tax reforms that potentially could make the country’s property market more appealing to investors, specifically for interested foreigners. Currently in discussion by Thai lawmakers, a draft bill is reportedly designed to open a wider door for direct foreign investment in the real estate sector.

The proposed law when enacted will provide “more flexibility in using property to drive the country’s economy and build investor confidence,” the Bangkok Post reported.

“The new law is expected to attract lessees, particularly foreigners, as they are prohibited from acquiring land in Thailand unless they obtain permission from the relevant government authorities,” the report added.

In the present set up or under the leaseholds law that Thailand has passed in 1999, foreigners are forbidden to own land but they can purchase condominium units with specific regulatory limits. In order for them to take legal hold on land properties, foreign buyers, in most cases, have had to resort to leasehold agreements that in the draft bill being discussed will extend more favourable provisions.

More Inviting Property Market

When the proposed bill, which the Thai government cabinet has already approved, is ratified by the National Legislative Assembly (NLA) – Thailand’s version of congress – foreign investors will stand to enjoy benefits not sanctioned in the existing laws.

The lease terms will be set at maximum of 50 years for leaseholds with explicit commercial purposes, and up to 30 years for agreements logged under personal and other purposes. Likewise, the bill will permit lessees to undertake renovations/changes on a building or property absent the expressed consent from lessors.

Another significant advantage to be gained from the planned tax reform is the provision that allows the use of a lease right as loan collateral, again without securing permission from the lessor. It appears that this specific proposal is intended to provide easy access to funding for nascent businesses in the property sector.

This is in line with the supposed intention by the Thai government to attract more investors, let them operate with better sense of confidence, and security and in the process boost the national economy.

One more notable provision of the draft bill, per the same Bangkok Post report, is the likelihood that lease rights will become transferable or inheritable under the new law. Apparently in the existing laws, lease rights will expire at the same time of a lessees’ death.

However, lease agreements in Thailand, in specific cases, can be transferred provided “that the lease expressly stipulates that they are,” according to Jo Lodder, Managing Director for ALFA Investors.

“If the lease is silent (on the matter), the rights are not transferrable with the deceased’s estate,” Lodder further clarified.

Waiting Time Extended

Meanwhile, the NLA it seems is taking its time on the proposed bill despite the stamp of approval transmitted earlier by the Thai cabinet. In an update story issued by the Bangkok Post, Thai lawmakers saw it fit to keep the reform proposals on committee level for now, convinced that certain provisions will require more time for deliberations.

The Thai government is targeting the planned tax reforms to take effect at the start of 2019 but there is no assurance from the NLA that work on the bill will be completed prior to the new laws’ scheduled rollout.