Developers rally for low-income clients

Real Estate March 25, 2019 01:00

By SOMLUCK SRIMALEE
THE NATION

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PROPERTY DEVELOPERS plan to call on the next government to revise the Bank of Thailand (BOT)’s loan-to-value measure, as well as to facilitate home ownership by low-income people and clarify the Land and Building Act, according to industry sources.



“We will ask the new administration to review the loan-to-value measure, effective on April 1, as it will negatively impact the property sector nationwide,” Pruksa Holding Plc’s chief executive officer, Thongma Vijitpongpun, said in an interview with The Nation. 

“The measure would make it harder for low-income people planning the purchase of a new property unit, as they may not be able to settle the 10 per cent down payment,” he said. 

Under the BOT directive, banks are restricted on the loan amounts they could extend to homebuyers: up to 90 per cent of the value of a new property, 80 per cent for the purchase of a second home and 70 per cent for a third home. 

Meanwhile, commercial banks have continued to restrict approvals of mortgages to lower-income people seeking to buy their own places.

LPN Development Plc chief executive officer and managing director Opas Sripayak agreed with Thongma of Pruksa Holding. The new government should relax the measure to provide low-income homebuyers with loans equivalent to 100 per cent of the new property’s value, he said. 

“The new government should make it a policy to facilitate home ownership for low-income people through easier access to mortgages with special interest rates,” Opas said. 

Currently, most low-income |people face difficulties in securing a mortgage loan regardless of |their ability to repay, mainly due to their failure to produce a sound financial statement to accompany their applications to commercial banks.

“For instance, if a low-income person wishes to own a residential unit priced at Bt500,000, he/she would first have to settle the 10 per cent down payment and other expenses such as the transfer charge and mortgage fee. This means |the applicant must come up |with Bt80,000 up front for |the mortgage loan to be considered,” he said, adding that it is difficult |for them to save up for the down payment.

“Though most low-income people may not be able to afford the down payment on a new property, they can meet the monthly instalment. Most have financial discipline and they all want to keep their homes,” Opas explained. 

With his experience in helping low-income customers buy LPN Development’s condominium units, Opas said the company could help them prepare a financial statement for the down payment as required in the application process for a mortgage loan from commercial banks. 

“In my view, the new government should ease the loan-to-value measure to support low-income homebuyers,” Opas added.

Prasert Taedullayasatit, honorary chairman of Thai Condominium Association, said maintaining interest rates for the duration of the mortgage loan is another issue that the new government must deal with. 

A 1-per-cent increase in interest rate will raise the monthly instalment by Bt800 on a mortgage loan of Bt1 million, he noted. 

“The priority of the new government [should be] to assist low-income people acquire homes, by revising the loan-to-value measure and lowering the interest rate,” Prasert said.

Land and Building Act

Speeding up the launch of an organic law for the Land and Building Act, effective since March 12, is also an urgent issue for the next administration, said Issara Boonyoung, honorary chairman of the Business Housing Association. 

He said the new Land and Building Act lacks clarity in the area of tax payable on a residential unit put up for rent. It is unclear whether the calculation comes under the residential or commercial definitions – which have different tax rates. 

Under the residential definition, a 0.02 per cent tax is imposed on a property for rent, compared to 0.3 per cent of the property’s value under the commercial definition. 

For instance, a unit valued at Bt10 million will be subject to Bt2,000 in annual tax under the residential definition, but will surge to Bt30,000 if the property is defined as a commercial building.

“There is a big difference in rates and payments,” said Issara, who is also the chief executive officer of Kanda Group.

Meanwhile, residential units in the inventory of property firms are also undefined, causing management problems and higher expenses. Developers may have to pass on the extra cost under the new act to their customers through price increases. 

“I hope the new government will hasten the passing of an organic law to give clarity to the Land and Building Act,” he said.