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Developments in property financing |
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Story : Marie Moon Photography : Nakarin Banjerdjin and |
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One of the major limitations of Thai property is the unavailability of finance for foreign buyers. While there is a growing variety of property available, the Bank of Thailand has always maintained this specific directive: no loans to foreigners without work permits. For the most part, full payment is required by the end of construction and not every buyer has that amount of ready cash. John Howard of Tilleke & Gibbins Phuket reminded, “There is some finance available through some Thai banks off-shore however it is essentially confined to condominiums.” When the news broke back in 2004 of the Bangkok Bank’s initiative to make it possible for foreigners to attain financing for leasehold landed property in Thailand through its Singapore branch, the market was suitably excited. The offer was attractive with reasonable rates and many believed this had the potential to revolutionize the Thai property market. However the ambiguous process as yet has been restricted to condominium purchases. John added, “I’m also seeing some more interesting initiatives now with finance companies entering the market and working towards offering finance to foreigners.” One such finance company National Home Finance Corporation will begin providing property financing on investment grade property in resort destinations later in 2007. This form of finance is typically backed by title insurance and this is somewhat of a new thing to Thailand, but there are precedents for it. Title insurance protects the insured by providing a full financial indemnity for any losses suffered because of a title problem. CEO of First American Title Insurance, Hong Kong clarified, “Financiers are generally much more willing to grant loans on title-insured purchases or investments as it mitigates a major risk of both investment and lending. Bankers across Asia are increasingly looking to the comfort such policies provide as they become more widely available here.” Other larger developers, particularly in Phuket, are taking matters into their own hands. Richard Skene, Assistant Vice President Laguna Property said, “we are proud to announce that we will be offering financing for our new Dusit Laguna Villas. It’s just been approved and will be available for the Lagoon-side villas. Buying property is still a big investment and not everybody has loads of money available. We have offered deferred payments terms before but this is basically equivalent to bank financing at competitive rates. We are the developer, owner and manager so we are doing the financing, but it would effectively be like borrowing from a Thai bank.” Another progressive developer, the Richmond Group, offers up to 50% financing on some of its property developments. Sales & Marketing Executive Nathanial Bibby said, “We offer a system of 50% down with two years to pay the remainder and we are talking with the bank at the moment to see if we can arrange some sort of five year finance.” Phuket development The Lantern located opposite the Boat Lagoon has managed to offer finance from a Thai bank as Thanakorn Prakaisriroj said, “After the customer decides to buy the house, we will contact the Siam City Bank. Now this bank has financial loan schemes for foreigners for up to 50% of the house price. This is certainly approved for customers with good financial statements. However, for the customers that do not fulfill the bank’s requirements, they can still get the loan because the Lantern guarantees to buy back from the bank in case the customer fails to repay the loan. As far as we know, Siam City Bank is offering this scheme to only the Lantern, Phuket.” Thus far without readily available finance, the foreign dominated markets of Phuket and Pattaya are purely cash driven and this has protected them from economic fluctuations that threaten other markets. The arrival of finance for foreign buyers, if and when it happens, will signal a whole new world for developers and buyers alike.
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Tropical Living: July 2007, Volume 7 Issue 2 |
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