99-Year Leases Would Create More Certainty for Foreign Business Owners in Thailand

Proposed Changes To Thailand's Property Laws

Proposed changes to property laws

At a recent cabinet meeting, Deputy Prime Minister Phumtham Wechayachai proposed the implementation of a previously presented resolution that aims to boost the Thai economy through the loosening of property laws. The two major changes that may be reviewed as a part of the proposal include:

  1. Extending the duration of leases from 30 years to a maximum of 99 years.
  2. Increasing the allowed foreign ownership in a condominium building from 49 percent to a maximum of 75 percent.

Not everyone is in favor of the proposed changes

As expected, news of the proposal was met with glee by foreigners who have longed to participate in the Thai property market more broadly. On the other side, some Thai government officials have publicly pushed back on the proposal who view it as akin to selling Thailand to foreign interests. The property laws and many of Thailand’s laws in general have always been protectionist in nature, established to protect the interest of Thai people. Other officials, also cite the fact that very few condominium developments have reached the 49 percent foreign ownership. That fact alone would make part of the proposal ineffective and largely unnecessary.

Longer leases for foreign business owners

In business, certainty is of the utmost importance. Having a longer lease lends itself to making strategic decisions, especially for businesses that require a longer runway for profitability. A good example of this is the recent introduction of the Yellow BTS Line that runs through Suan Luang. Acquiring a business in this area is a great strategic move as over the next decade there will be dozens of condominium developments constructed now that the surrounding neighborhoods are connected to central Bangkok by efficient public transportation. However, this will take time and some businesses may struggle to be profitable before those developments arrive.

Another benefit of longer leases for business owners is the ability to sell a business with a much longer lease. The longer the lease the more attractive the business will be to potential buyers. At Siam Business Brokers, we often see owners attempting to sell business with only a couple of years or less left on the leases. Business leases with shorter terms remaining can be difficult for owners to sell as buyers don’t have the certainty they need for business planning. After only a year or two of running the business, the buyer is forced back to the negotiating table to renew a lease. For smaller businesses, such as bars and restaurants, this is likely a non-issue, but for those prospective owners who are investing large sums of money into acquiring as business, that certainly is paramount.

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