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Foreigners can buy home or land in Thailand or not?
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 Informative Article Summary by Anny Redperz
1) Buying your dream home in Thailand
You might be surprised to learn that the home countries of some expats have property laws that impose restrictions on real estate ownership not unlike those applied to foreigners here in Thailand. The difference is that in some expat home countries these restrictions are imposed on everyone, not just foreigners.
Direct property ownership
When it comes to real estate in Thailand, foreigners are only permitted full and direct ownership of condominiums. Enjoyment of any other category of real estate by foreigners cannot be secured via individual direct ownership.
Foreigners wishing to secure the use and enjoyment of real estate in Thailand other than condominiums will often do so through a land lease, putting them in a somewhat similar position to tens if not hundreds of thousands of people who have ‘bought’ apartments in the UK, particularly in London.
Thai Sabai
One of the most common ways for foreigners to secure rights to the use and enjoyment of real estate other than condominiums in Thailand is by taking out a lease over a piece of land and then erecting a building on that land. Foreigners can't own land in Thailand, but they can own the buildings they construct on land that they lease.
Although land lease terms under Thai law cannot exceed 30 years, it is possible to negotiate with the Thai landlord for options to extend land leases beyond the end of the current term. Landlords in Thailand are under no legal obligation to include such options in land lease agreements, but there is no limit to the number of extension options that can be incorporated into a land lease if they are willing to grant renewal options.
To enjoy maximum legal protection and to ensure that their rights under their land lease are enforceable, foreigners should register their lease agreement with the local Government Land Office.
The Thai company option
Foreigners can also secure enjoyment and use of real estate in Thailand by purchasing via a Thai company. Under Thai law, a normal category Thai company cannot be majority owned by foreigners and so a common practice has been to use nominee Thai shareholders and or to attach different voting rights to shareholdings of the Thai and foreign shareholders. This practice is at best a grey area and over the past year or so Thai Government Land Offices have been taking a much closer look at the funding sources of Thai companies that have foreign shareholders with large shareholdings.
We would like to stress that this is a result of more rigorous enforcement of existing Thai laws and regulations regarding foreign shareholders in Thai companies.
It is also worth bearing in mind that Thai companies are expected to be used as vehicles for conducting commercial business. Thai companies set up solely as a vehicle for holding land and real estate, (even if they are 100% Thai ‘owned’), could easily become targets for the kind of scrutiny now being applied to Thai companies with foreign shareholders. Legally, purchasing land via a Thai company is only an indirect form of asset enjoyment.
An officially registered land lease agreement in Thailand provides expats with a direct and very personal form of enjoyment of land and property.
Foreigners in Thailand are guests in one of the most desirable countries in the world in which to live as an expat. While there are restrictions placed on the ownership of real estate by foreigners, Thailand still affords expats options for their accommodation needs that go well beyond simply renting an empty building.
This review of foreign ownership of real estate in Thailand is provided for information purposes only. No advice is intended and none should be inferred.
Regulations and their official interpretation are subject to change without notice and so we would always encourage readers to consult with a professionally qualified Thai lawyer, before entering into any form of land or other real estate transaction in Thailand.
2) Financing your dream home in Thailand
Financing is an important issue for many foreign property buyers in Thailand. We are so used to having access to financing in our home country that we do not realise how difficult it may be to access a loan when purchasing in a foreign country.
There is a lot of information out there in relation to financing for foreign buyers but essentially it comes down to three choices: purchasing with cash outright, re-mortgaging a loan in your home country or obtaining a local loan from a bank with subsidiary networks in a regional country, namely, Singapore. There are other options for obtaining local financing from domestic banks in Thailand but they are not usually available to non-residents and therefore are often more difficult to obtain.
Cash is King
Using cash to purchase your dream property in Thailand is certainly the easiest financing option and some people with excess liquidity are able to do this quite easily. Others choose to borrow from family or friends to fund the investment. Although this is the easiest option, it may tie up your funds unnecessarily. This is especially the case when purchasing properties as these assets can have slow liquidity. Obtaining institutional financing, if done carefully, can serve as a useful investment tool even if you have more than sufficient cash to cover the purchase.
Re-mortgaging equity with existing property in your home country
Many buyers are taking advantage of the capital increase of their principal homes in their own country. Typically, you can get a re-mortgage on your home to release the surplus equity. This will then generate the financing required for that holiday home in Thailand. You still have to show that you have the means to meet the repayments after re-mortgaging your property. If you intend to generate income from the property in Thailand, then it may be necessary to show a rental agreement to the bank. The main advantages and disadvantages of this method vary according to individual circumstances. However, there are some important factors to consider.
The advantages
The service and all the necessary documents are available in your own language making the process more familiar and trouble-free. Your credit history with your current lender may make the loan easier to obtain as you are borrowing on the strength of your home. More competitive and flexible terms and conditions from a more developed financial system. If the equity from your home is sufficient, you can purchase the property in Thailand in cash which may result in a better price and more bargaining power.
The disadvantages
Variable rates may have adverse effect on your ability to meet payments. May spend years paying off extra repayments well into your retirement. Failure to meet payments for any reason may result in you loosing not only your property in Thailand but your home in your own country. A re-mortgage on your personal home may hinder your ability to obtain further funds for emergencies in the future.
Over the past few years, we have seen the Singapore branch of Bangkok Bank working hard to provide a respectable lending scheme to foreigners wishing to buy a property in Thailand. It has been met with good success although certain political elements in the country over the past year or so have lessened its eminence slightly. Nevertheless, the scheme is still available to qualified purchasers. In fact, over the past year, other banks have begun introducing their own schemes such as Singapore’s United Overseas Bank (UOB) which has branch offices all over Thailand.
The advantages
This has been good news for Thai property buyers worldwide. Local financing has meant greater access to the property market and more flexibility in investment choices. The main advantage of this type of lending scheme is that you can obtain financing upon the strength of your property in Thailand. The mortgages are available in either Singapore or US Dollars, meaning that borrowers have the option of choosing a more stable currency to work with. However, care must still be taken if your income is not in either of the two currencies as fluctuations can have an adverse effect on your repayment abilities.
The disadvantages
The main disadvantage of obtaining a local loan is that it usually has a low loan-to-value (LTV) ratio. Some countries allow financing for up to 90 per cent of the property. In Thailand, the LTV ratio is 70 per cent at most, although it is generally around 50 per cent. Amortization rates are also usually quite low with the average period of loan standing between five and ten years. There is also a requirement that the mortgage has to be fully repaid before you turn 65 years of age.
Other Local Financing Options
There are other banks, both domestic and international, offering lending facilities to foreign nationals in Thailand. These include HSBC, Siam Commercial Bank (SCB), Thai Military Bank (TMB) and TISCO Bank. These banks offer more competitive rates but they do have strict residency requirements. At a minimum, borrowers must hold an Alien Registration Book indicating their permanent residence status in Thailand.
Final Word
Financing a dream property in Thailand is not as mystifying as many believe. Although it is not as straightforward as some countries, financing is accessible for property purchases in Thailand depending on individual circumstances. As outlined, there are indeed some serious matters to consider before you plunge in at the deep end. Keep in mind your ultimate objective in buying a property in Thailand and have a plan ready should you become unable to keep up the repayments or unable to sell off the property in the future.
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