Firms seek to up rates of low-cost projects

The government is expected to unveil a fresh stimulus package that would include measures such as extending the property-rental period for foreigners. It is also considering raising the ceiling on rates of low-cost houses in zones identified by the Board of Investment  (BoI) for development to factor in higher construction costs.

Deputy Prime Minister and Finance Minister Surapong Suebwonglee has said the government is thinking of extending the period for which foreigners can rent property in Thailand from 30 years to 70 years, or even 90 years.

Developers said the move would be a better bet than revising the Foreign Business Act to allow foreigners to hold more than a 49-per-cent stake in Thai companies.

The Government Housing Bank and developers have asked Deputy Prime Minister and Industry Minister Suwit Khunkitti, and the BoI to revise the board's criteria for granting tax privileges to housing projects in property-investment zones.

They want the minimum number of units required to meet the criteria brought down to 50 in each zone. They have also asked the government to increase the maximum sale price of the units from Bt600,000 per unit to Bt1 million in view of the rising costs of construction materials, such as steel, and a surge in oil prices. 

The tax privileges were formulated in 1991 after the Cabinet asked the BoI to provide developers incentives to invest in housing projects for the low- to middle-income group.

In 1993, the government unveiled the criteria for such tax incentives. Projects in investment Zone I - comprising Bangkok, Samut Prakan, Samut Sakorn, Pathum Thani, Nonthaburi, Nakhon Pathom - were required to have at least 150 units. Projects in Zone II and Zone III were required to have at least 75 units.

Zone II includes Chon Buri, Chachoengsao, Samut Songkram, Nakhon Nayok, Sara Buri, Ayutthaya, Rachburi, Angthong, Supan Buri, Kanchanaburi, Phuket and Rayong. Zone III covers the remaining 58 provinces and the Lamchabang Industrial Estate.

The ceiling price was set at Bt600,000 and the units were required to have a utilisation area of at least 31 square metres.

The blueprints had to be approved by the BoI. This was to ensure the projects were not being developed for commercial purposes.

Several developers submitted proposals to avail the incentives and in 1994, the BoI approved 87,603 units worth Bt21.33 billion.

The government's Eua-arthorn Housing Project also rekindled interest in developments for low- to middle-income group in 2005.

However, the projects have seen lesser investment in recent years. The number of units being constructed has also been falling. As per BoI records, 35 project proposals for 36,175 Eua-arthorn units were submitted in 2005, 54 proposals for 61,331 units were submitted in 2006 while last year, the numbers dropped to 32 plans for 13,688 units.

Government Housing Bank director Khan Prachuabmoh said a relaxation in BoI's criteria for tax incentives would help stimulate the overall economy by giving the property sector another shot in the arm.

The government should consider providing financial support to encourage buyers to go for housing projects in the investment zones, he said. Such moves would require a lower budget allocation than the Eua-arthorn projects, he said.

If the government does not step in, low- to middle-income buyers will not be able to afford homes, Khan said.

The Government Housing Bank is leading an initiative for a Royal Decree for the establishment of an agency that would insure housing loans. This will help home-buyers, who have no savings but earn enough to pay instalments, to be able to borrow 100 per cent of the value of the house from banks, he said.

      At a glance

n The Government Housing Bank and developers have asked the Board of Investment to revise its criteria for granting tax privileges to housing projects in property-investment zones.

n They want the minimum number of units required to meet the criteria brought down to 50 in each zone.