A change to current regulations is expected to have substantial impact on development on the island which will see a new environmental regulation come into place for Phuket by the third quarter of this year – 2010. The existing guideline titled "The Announcement of the Ministry of Natural Resources and Environment – Specifications of Environment Protection Areas and Measures for Phuket B.E. 2546 is set to expire on September 30th.
"The Thai Government has released a new draft which has been reviewed by leading Bangkok legal firm Baker & McKenzie who have reviewed and released comments as follows:
The current version of the draft could substantially effect developments and land values in Phuket.
As an example land which is located in Zone 6 (40-60 meters above sea level) currently says that for slopes next exceeding 35% than buildings must be 8 meters or less.
Under the revision for slopes under 20% which allows 8 meters or less in heights for buildings, but for inclines of 20-50% only detached houses or single buildings of less than 6 meters in height are allowed.
For requirements in 'open' spaces, in the existing guidelines if an incline is less than 35%, then an 'open' area of not less than 40% of the total land area needs to be allowed.
On the new draft where slopes of 20-35% are existing, open areas of 70% are required while for slopes of 35-50%, then 75% must remain open."
The legal firm expects final guidelines to come out over the next few months or prior to the end of September. For those wanting more information they can contact Baker McKenzie in Bangkok for details of the full draft.
If you are developing or renovating property that has significant slopes, a complete review of the issue and perhaps expediting of build permits prior to the new regulation coming into effect might be advisable.
Leading vacation ownership exchange organization RCI will be holding its 'Asia Leisure Real Estate Symposium 2010' in Singapore on April 22-23. Leading experts include Richard Ragatz, John Small, Russell Smith and Phuket's Desmond Hughes.
Venue is at the Pan Pacific Hotel and more details are available at
<link>http://www.rciasia-symposium.com*RCI Symposium 2010</link>
The timing for a new independent Phuket based public relations and marketing communications agency who recently launched could not be better. 'Shine PR Phuket' offers services including; copywriting, media relations, crisis communications management, resort pre-opening services, and more to Phuket's hospitality and property industries.
Director, ex Laguna Phuket, Natasha (Tash) Eldred, told us "After the recent economic downturn, outsourcing services has become increasingly popular, creating fantastic opportunity for freelancers and small medium enterprises (SMEs)." She added, "For many Phuket companies hiring expats is not cost-friendly especially in 'nice to have' positions such as PR."
Perfectly positioned, Shine has the energy, contacts, hospitality experience and channels of creating well-considered stories on behalf of Phuket's businesses to media at home and abroad.
More details on <link>http://www.shineprphuket.com*Shine PR Phuket</link>
Leading Vietnam hospitality and property developer VinaCapital Group have announced plans for a Greg Norman branded luxury villa estate in Danang. Located in the fast tracked China beach area with 40 upscale residences on offer to compliment the international golf superstar's signature golf course.
Construction contracts have been awarded to Southern Cross Development with a project cost of the mixed use development estimated at close to half a billion USD.
Another nearly destination resort Laguna Hue which is being driven by Banyan Tree will also be heavily targeting the luxury market as it tries to replicate its successful Laguna Phuket resort.
Leading Thai listed property development firm Charn Issara will continue to diversity into mixed-use destination resort real estate through a new property fund. Plans have been made public for a mid year offering which will see the luxury 40 key Sri Panwa resort valued at THB 1.7 billion injected into the fund.
While its core Bangkok based urban residential model has flourished during the past year's condo surge, plans call for mixed use developments in Phuket, Samui and Hua Hin which will include further moves into the hotel sector.
The recently launched Regent Bangtao condominium project by local developers G-1 Land is set to tap into the value market with price points starting from THB 4.2 million. Located at the entrance of Laguna Phuket, next to the successful Sai Taan luxury villa project, 151 units are in the works.
Units range from 44 square meters up to penthouse units with 160 square meters priced at THB 17 million. Full resort facilities include restaurant, pool, fitness center, and spa are available.
Completion is scheduled for 2011 and a guaranteed rental return of 7% for 2 years is available. Common area fees are estimated to be THB 30 per square meter, payable annually in advance with a sinking fund of THB 300 per square meter.
As land prices in the Bangtao area continue to rise, this project along with the Laguna Lofts are ushering in a new higher density model with the Regent development taking up just 3.1 rai with 7 story buildings.
I recently read a white paper by Charles Blocker who heads up development at Invision Hospitality in Bangkok who puts foward the case for 6o year property lease terms. We have been given permission to run the article which also appeared in AMCHAM'S T-AB Magazine Volume 1/2010.
"The Joint Foreign Chambers of Commerce in Thailand (“JFCCT”) Property Committee (“Property Committee”) advocates an extension of the maximum rental term for land from a 30-year lease to at least 60 years. This advocacy position was chosen from many other suggested reforms, not only due to the ease of actioning and implementing, but as a real and measurable fiscal stimulus to benefit Thailand by increasing investment in the second home market and tourism.
Set forth below are excerpts of the executive summary of the thorough White Paper, which was prepared by JFCCT Property Committee members with strong legal leadership and counsel from Baker & McKenzie, on the JFCCT's leasehold extension recommendation to the Royal Thai Government.
The Case for Leasehold Extension
Thailand's property market has great potential and opportunity to develop and grow, both from investment made by local and foreign investors, as well as from consumers. This is due to the attributes which make Thailand an attractive destination for investment in property. Year-round tropical climate, beautiful scenery, a culture of friendly hospitality and a service mindset, and relatively low cost of living and labor are some of the qualities that greatly appeal to both investors and consumers in the property market.
One opportunity for growth stems from Europe, as the latest research indicates there are approximately 30,000 people from Scandinavia, the UK and Germany who have acquired second homes in Thailand, generating an estimated Baht 75 billion in revenue. Amazingly, this has the potential to increase to 90,000 second homes in three to five years, which would generate around Baht 150 billion in income for Thailand. This income would not only stimulate the growth of the Thai property market, but also the economy as a whole.
However, due to certain legal disadvantages, Thailand is currently running the risk of missing out on this immense opportunity, as well as numerous other potential investments. Because of these legal disadvantages, Thailand is unable to provide a proper platform to accommodate investment, which ultimately hinders growth and development.
One of the most significant legal disadvantages is the restrictions on long-term leases. Thailand's maximum lease term is 30 years for both Thais and foreigners, with renewal options of further 30 years. However, even though the existing regulation already allows for two lease agreements to be registered at the same time over the same property, the issue concerned is whether two 30 years lease agreements can be registered at the same time over the same property. Due to the general practice of the officers of the Land Department, this proposed lease scheme (30+30) may not be acceptable to the officer, as there is no clear guideline provided in the existing regulations. For most cases, the lessee has to wait until the first lease term has ended before registering the second lease agreement. Moreover, the option to renew the lease term in the lease agreement may not be legally binding on successors to title, thus creating risk and uncertainty pertaining to the renewal of the lease term.
Therefore, this is the most restrictive and uncertain leasehold law in the region. As a result, investors/developers are put off by the fact that they may have a very short period of time in which to recoup their investments. This is especially true for foreign investors who cannot own land. Meanwhile, foreign consumers who wish to lease property for a second home/retirement home may also feel that such lease period is too short.
Consequently, some investors and consumers are deterred from investing, as an investment platform accommodating their need for definitive long-term leases is lacking. Meanwhile, some investors choose to invest elsewhere in the region, particularly in our direct competitors, such as Malaysia and Vietnam, which are prepared to capitalize on foreign investment opportunities, aided by better investment platforms. It is therefore paramount that Thailand find a solution to these legal disadvantages quickly, or risk losing our existing and potential investors/consumers to our competitors.
The most feasible and appropriate solution to the problem is to revise Land Department regulations to specifically and clearly allow 60-year leases, whereby two lease agreements can be registered and enforced in accordance with the Civil and Commercial Code (the “CCC”), on a back-to-back basis, allowing for the 60 year consecutive term to be definite and unambiguous. This solution is both efficient and achievable, and should be sufficient to provide investors/consumers with the appropriate investment platform.
Revising Land Department regulations would be an opportunity to stimulate the property market by encouraging greater investment from domestic and international sources, both by existing investors and potential new ones.
In conclusion, the proposed solution is both suitable and feasible. It will solve the legal disadvantage, provide investors with a more satisfactory investment platform, and will ensure that our competitors do not capitalize on investment opportunities belonging to Thailand. It will also stimulate property investment and the economy as a whole. Failure to eliminate the legal disadvantage promptly will result in lost opportunities.
The Recommendation for Improvement of Land Department Regulations
In order to eliminate the ambiguity in current laws and promote Thailand's property market, the Land Department should consider enacting a new regulation or amending current regulations, to specifically support and allow the 60-year lease scheme. The regulation should state clearly that the Land Department will register and enforce back-to-back leases of 30 years each, in accordance with the CCC, allowing the 60-year consecutive lease term. If promotion of the property market is considered of high importance, either the Director-General of the Land Department, or the Minister of the Interior as the overseer of the Land Department, should amend/clarify the existing laws.
Conclusion
The amendment of existing laws or enactment of new laws is inevitable if the long-term growth of Thailand's property market is to be encouraged. While it will not be easy, using legislation to bolster investment in property is certainly an effective, more definitive approach.
The above solution is workable, since existing laws open a channel for the government to allow long-term lease schemes. This will accommodate both customers, i.e. local and foreign individuals who desire long-term lease/stays, and developers, who wish to secure their investments through long-term leases.
An increase in competition from neighboring countries, which are also looking to capitalize on foreign investments, means a definitive solution is more important than ever. The government's provision of incentives to both customers and developers will do much to help increase both supply and demand in the property market in Thailand.
In conclusion, to implement the solutions proposed herein, the Cabinet, as the supreme body of the government, must enact administrative rules under existing laws to promote the property market, which rules relevant subordinate authorities must follow and promptly put into action. In this respect, the Cabinet may resolve that the Ministry of the Interior enact a Ministerial Regulation guaranteeing the 60-year lease scheme, by ruling that the registration of two consecutive 30-year lease agreements is enforceable under the law. The Minister of the Interior should also order that the Land Department issue a Regulation stipulating guidelines that land officers must follow when registering leases under the scheme."
According to a report by the Bangkok Post Chief Executive Officer of Purnavarna Resorts Co. Steven Granville has been arrested and charged with fraud.
A complaint filed with Thailand's Crime Suppression Department by a Singapore national who represents 19 property purchasers alleges damages of THB 217 million over the non delivery of units in the development which commenced in 2005 and was to have completed in 2008.
While bail has been set at THB 10 million, Mr. Granville has deferred a release; and comments in the media have been made that further suspects may be included in the Criminal Court case.
The Purnavarna case unravel a rather bizarre circumstance which saw the group launch a Rawai based luxury estate development which offered 10% annual guaranteed returns and over the past few years continued to offer a number of varying promotional strategies to generate real estate sales.
While some villa units have been partially completed, construction on site ceased a few years ago. The group continued an aggressive expansion plan back of the acquisition of the Royal Phuket Yacht Club Resort from Lehman's at the height of the property boom.
Since that time it has continued to operate the hotel and last year launched fractional sales of resort units within that property. It has also renamed the original Purnavanra luxury estate as “The Summer Palace.”
According to local sources one of the group's major investors is a high profile Spanish football club who have reportedly been trying to recoup their investment in recent times. Market analysts have commented that the group's only operating asset, the resort has been on the market at a figure which was considered to be well above existing valuations. Additionally concerns by interested parties have been voiced about the ability to obtain vacant possession due to the units which have allegedly been sold to individuals.
Expect more news on this case in the coming days, and the specter of vulture hotel asset buyers can already be seen circling Nai Harn beach. As for the Phuket property market certainly the adverse publicity which looks set to go international is not a welcome sight.
As the non traditional holiday accommodation market hits critical mass Siam Real Estate have launched a new dedicated booking portal with over 2000 properties in Thailand at <link>http://www.siamvillarentals.com*www.siamvillarentals.com</link>. With product in Phuket, Samui, Pattaya, Bangkok and other locations the strategic move is aimed at diversifying into an area which CEO Richard Lusted sees as containing long term sustainable growth.
