Charn Issara urges longer lease terms
AS the mid- to low-end of the Bangkok property market is currently facing problems action is needed to spur the whole market forward and a good step would be to extend the property lease terms here from the current 30 years, Charn Issara Development Plc’s managing director Songkran Issara said recently.
Although his company is not affected by the slowdown in the lower half of the Bangkok market because it is well-entrenched in the mid- to high and luxury segments, Mr Songkran is nevertheless concerned about this disturbing turn.
“I would like the government to make leaseholds longer – this doesn’t seem like much but it does send a signal that we warmly welcome investors both those already in the country and those outside planning to come in.
“Leaseholds are currently 30 years but if its 50 to 60 years not only investors still abroad but those already here would benefit. Just 30 years is too short we should change it.
“This is solid and not something light, cutting taxes is just a small step but this is a fundamental change and it will trigger a big new wave.
“It’s not something on the surface and long term people will see this more clearly,” he said.
In a report published by The Nation Aliwassa Pathnadabutr, managing director of CBRE Thailand said that the lease duration period for Singapore, Cambodia and Malaysia is up to 99 years. China offers 70 years, Vietnam 50-70 years, and South Korea, the Philippines and Taiwan 50 years.
Thailand generally offers a 30-year lease, but the legislation was amended in 1999 so that long-term leases for commercial and industrial purposes could be up to 50 years.
While all Bangkok developers would benefit from this step, so would builders in resort towns and cities. Charn Issara’s current key resort projects include Baba Beach Club on Phang Nga’s Natai beach with this being a joint venture with its Chinese partner Junfa Real Estate Company, The Issara Chiang Mai in the northern city and Baan Thew Talay condominiums and Baba Beach Hotel in Cha-am-Hua Hin twin towns.
Mr Songkran added that his company would be launching its new REIT (real estate investment trust) by yearend. Its existing property fund, worth over 2 billion baht, will be converted into this REIT and additional funds raised will be used to purchase the second phase of the luxurious Sri Panwa development in Phuket.
The new extension at Sri Panwa consists of 30 pool suites and this will be sold to the company’s REIT for 1.25 billion baht taking the total of over 3 billion baht.
In fact Charn Issara is the first company undertaking this sort of a conversion which is necessary because the property fund structure cannot grow any further.
“The property fund structure gave a lot of benefits to all investors but the government lost ground.
“They introduced this when NPLs (non-performing loans) were high during the Asian economic crisis.
“At that time they gave a lot of incentives but now we are in a normal situation if we want to grow we have to convert to a REIT.”
He added that Thais like investing in REITs with the return from the new one expected to be 7% per annum compared to a little over 1% currently obtainable from savings deposits. They also appreciate the fact that REITs are backed by properties which are usually efficiently taken care of.
CAPTIONS:
TOP: The swish Baba Beach Club which is shaping up on Phang Nga’s Natai Beach.
INSET: Mr Songkran says offering longer lease terms would be a major change.
By Nina Suebsukcharoen
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