THAILAND Law and Practice Contributed by: Olaf Duensing, Jerrold Kippen and Weeraya Kippen, Duensing Kippen, Ltd.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
nying land or condominium units, where (i) the sale price and the official appraised value of the property; and (ii) the mortgage amount, each does not exceed THB7 million and the purchaser is a Thai individual, are currently as follows: • sale: 0.01% of the official appraised value (reduced from the normal rate of 2%); and • mortgage: 0.01% of the mortgage amount (reduced from the normal rate of 1% but not exceeding THB200,000). The reduced rates will be valid until 31 Decem - ber 2024. 2.11 Legal Restrictions on Foreign Investors The Land Code generally restricts foreign owner - ship of land unless otherwise permitted by law. Such exemptions are available under certain conditions if the foreign party intends to make a business investment of the type that the Thai government wishes to attract at that time, and in some cases, at a particular location under either the Investment Promotion Act or the Industrial Estate Authority Act. There is no prohibition against foreign investors owning a building or against leasing land or a building. Foreign investors may also own up to 49% of the titled floor space of a condominium project. However, the money to purchase a condomini - um must either be brought into Thailand as for - eign currency or held by the foreigner in a Thai foreign currency account.
Although sometimes financed by private equity, commercial real estate transactions in Thailand are most commonly financed by loans made by banks. The terms of such bank loans vary depending on the property, the type of develop - ment project, the borrower’s history and reputa - tion, any available guarantee (and in such case, the guarantor’s standing) and the lender’s pref - erences. The loan may be made all at once or provided via a draw-down facility. Interest may be fixed or variable. Thailand recently enacted a formal real estate investment trust (REIT) structure. Thailand’s REIT is similar to what is found under the same name elsewhere, eg, the USA. REITs in Thai - land are listed on the stock exchange of Thai - land and, although they initially got off to a slow start, they are picking up momentum and are now providing a modernised financing vehicle for large-scale commercial real estate invest - ments in Thailand. 3.2 Typical Security Created by Commercial Investors Typical security provided by commercial real estate developers to their lenders includes one or more of the following: mortgage, pledge, busi - ness collateral, assignment and guarantee. Mortgage A mortgage is a non-possessory security and may be registered over immovable property (eg, land or buildings) and some movable properties (eg, machinery) that has been registered under the Machinery Registration Act.
941 CHAMBERS.COM
Powered by FlippingBook