Gazing into the crystal ball: Seven real estate predictions Thailand 2020 

Real Estate Investment & Law Updates Thailand Conference 2011 – 2020

The event is promoted by the conference organizer Business & Manufacturing Network Media (BMN) with these words: “Over the past few years, many Asian real estate markets have strongly performed, among the regional competitors; Thailand is seen as an outperforming investment destination for real estate foreign investors. Regardless of the compelling attractiveness and opportunities, the Thai real estate market still remains a challenge for most business players in this sector, whether developers, investors, or buyers. The nature of developing and investing in real estate in Thailand is complex. To make a wise project development and investment, it is more necessary than ever for all real estate players to understand and comply with the various laws, as well as the many procedures involved in connection with their transactions and projects.

The past few year periods have been a time of change for Thai laws and legal requirements in the real estate industry. These include the Foreign Business Act, amendments to the Building Inspection Act, the Condominium Act, Escrow Business Law, Consumer Proceedings Law & Environment Law, as well as legal guidelines for Trust transactions in the Thai capital market, for instance. These changes have exerted further pressure on players to pay more serious attention to develop a thorough understanding of the relevant laws and regulations, to avoid pitfalls, or failures. In addition, understanding of crucial transactions, such as buying land & owning land, property acquisitions, sales & purchase contracts, tax planning for property, etc., will all become essential assets for players to obtain the best benefits from investment in this sector.

The conference is specially designed to bring together key policymakers, government agencies, and high profile legal and tax experts to address the regulatory policies, latest legal developments, future legal directions, as well as country development plans concerning land, property or real estate in Thailand. Moreover, hearing strategic preparations and comments from real players in the Thai market from different aspects, such as project development, asset management, and project consultancy, who will be featured at this premier event.” Dr. Ulrich Eder, Managing Director of the Bangkok law firm PUGNATORIUS LIMITED acts as chairman to the conference and delivers the Welcome & Opening Remarks to an international audience. ” <Download of the Conference Brochure>

Seven looks into the crystal ball: Thailand’s Real Estate Update 2020 

#1. Sap-Ing-Sith investments will not be available in 2020: The Sap-Ing-Sith Act is the first real game-changer on Thailand’s real estate markets. Its disruptive power goes far beyond the level of liberalization of foreign property investments than acceptable for Thai public opinion. Although the law is already effective, the missing regulatory framework will make it at least in 2020 impossible to create such an investment structure. Too good to be true. Details at “The Sap-Ing-Sith revolution“. Instead, the main impact of the #SapIngSith will be that it showcases the pitiable weakness of the leasehold investment structure.

#2. The lease will be debunked 2020 as the emperor’s new clothes: In the case of a leasehold investment, it is doubtful whether the part “leasehold” or “investment” is more flimsy. The Sap-Ing-Sith Act will highlight this in 2020 for foreign property buyers. Leasing cannot be acquired, transferred, or sold, can’t be mortgaged, and will not survive the death of the lessee. Any significant restructuring requires the consent of the landowner. More and more “villa owners” on leased land will realize in 2020, that they do not own the villa and that the investment is solid as a house on an iceberg.   

#3. Corporate property structures are still in 2020 the royal road: The property acquisition through a Thai corporation will remain to be the silver bullet for foreigners to acquire real estate in Thailand. Traditional simple and naïve structures will come under pressure. To do it without preference share structure, to book the building in the company’s balance sheet and to waive for the tools and modules to protect the whole investment will turn out in an increasing number of cases as a bad decision. Most foreigners do not have enough money to accept cheap legal advice with unprotected investments in their Thai paradise.

#4. The new Land and Building Tax Act will have a greater impact than is currently expected: Despite its moderate tax rates, the land and building tax will have remote effects on certain areas of Thailand’s property industry. The first example is whether taxation according to the second-home category is applicable in a buy-to-let scheme when more than one house is owned. Also, the tax-efficient restructuring of land utilization will be part of future property developments. However, the main impact will result from the newly implemented Property Appraisal for the State Benefits Act 2019. Although new appraisal values under this Property Appraisal Act will be issued only within 24 months, its fair market value appraisal approach in a land that kept for decades a tax-driven shadow-valuation system in government books will show its disruptive energy.

#5. Due diligence, due diligence, due diligence: The headline “Five MPs claim land ownership based on flimsy proof” gives the wrong impression that incorrect land titles are a problem of the rich and famous only.  The new year will offer more case material that even the establishment of a corporate structure as a registered landowner and the regular payment of taxes will not protect the foreign investor in good faith from a total loss if it was waived to check the land deed to the root. The chain of available documents by no means ends with the date of the issue of the Chanote. 

#6. The forgotten land: During the last decade, it has been surprisingly common for foreign investors to acquire Thai land through a corporation and over the years this corporation has been removed from official registers. The re-registration of struck off companies is a challenging activity. Due to the new Thai property tax regulations, such abandoned properties will increasingly come into the focus of the authorities. There is thus an urgent need for action for forgotten properties in 2020.  

#7. Real estate tokenization: 2020 will see the first real estate tokenizations. However, token buyers will have to realize that the  statement “if you own/transfer the token, you own/transfer the property” incorrect is.

Professional services from Bangkok for real estate projects all over Thailand

PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. Real estate transactions, combined with secured corporate structures and tax-efficient cross-border transactions, are one of the four main activities of the law firm. PUGNATORIUS Ltd. provides real estate investment structures that are legally valid, in compliance with Thailand’s foreigner legislation and that sustainably protect the foreign investor.

Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice, nor an attorney-client relationship, nor equips with the insights, tools or skills to do this without the Bangkok investment law firm.

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