With rising apprehension about Thai laws governing property sales, local and foreign players are concerned that the government may be sending wrong signals that could hurt the overall industry.

CB Richard Ellis chairman David Simister believes it may be time for local authorities - including the Commerce, Interior, Tourism, Finance and Tourism ministries - to overhaul what are long considered to be antiquated laws governing real-estate transactions.

"The 49-per-cent foreign ownership condominium law was appropriate at the time it was brought in [about 10 years ago]," says the veteran head of the region's top property agency. "But circumstances have changed."

"Today, the law could be better served with some amendments," he says. "Whilst the ruling works for Bangkok and Hua Hin, where there is a 50:50 local-foreign take-up, this is not true of places such as Phuket, Samui and Pattaya, where foreign demand is much higher, sometimes as high as 80-90 per cent."

But the recent crackdown on unlawful transactions and business practices, he adds, is quite justified. He defends government investigations into cases where charges of wrongdoings and abuse of the law have been filed.

It is no secret that a number of foreign and local players have been engaged in illegal practices, with incidents of fraud and even murder.

Punitive action should follow if parties are found guilty, says Simister. "Everyone in the market needs to be better protected," he adds. "It [the crackdown] is good for the overall market."

At the same time, Simister hopes authorities will modify property regulations to better serve the Kingdom's increasingly popular high-end housing market. To start, much can be done to quell existing confusion and anxiety, which will bring more harm than good to highly prized local properties, which he ranks "Asia's hottest real-estate products". Even with strict regulations, big players such as Malaysia's Shangri-La and Singapore's Raffles are entering the Phuket-Phang Nga markets, says Simister, who represents the two global chains.

The hotel chains will be offering leasehold villas to foreigners in their resort compound like Laguna Resorts at Bang Tao Bay, he says.

Recent checks on local proxies and bogus companies have had no effects on his clients.

"But in the middle and lower segments I have heard complaints where buyers are apprehensive or hesitant about buying," he warns.

"Foreign buyers don't intend to cheat, but often what happens is they appoint proxies because they are told by lawyers 'that's how properties are bought' here."

The best way out of the current conundrum, he says, may be a broader approach, which aims to promote foreign investments with a 'resort industry' programme.

This approach is nothing new, and has been successfully carried out in Thailand before. Authorities in the Sixties adopted a policy to allow foreign companies to own land in industrial estates to promote what was then an infant manufacturing sector.

The revised industrial laws benefited the Kingdom enormously with the growth of world-class industrial zones, many on the Eastern Seaboard, thus safely diversifying a largely agrarian economy in past decades.

The same could be done for the resort industry, he says. The move would encourage large players that can invest big sums to construct 'low-density projects' that also better preserve the natural environment. This would protect beaches from becoming squalid and mass-tourism nightmare spots like many parts of Pattaya. Simister is concerned that environmental degradation be kept at a minimum.

Authorities should recognised the benefits," he says. "Is it better to have high-end, long-stay visitors who can buy homes for say for US$1 million [Bt36 million], or invite mass tourism and people who pay a few hundred baht a night at guest-houses?"

"When foreigners buy homes, they don't just bring in vital foreign exchange, they create jobs for Thais," he says. "One of our customers from Kazakhstan pays Bt500,000 a day just on his golf, dining and travel arrangements."

Simister says a strong indication that foreigners are prepared to buy leases in Thai sites can be illustrated by the success of Laguna homes at Bang Tao Bay.

"As foreigners can only buy landed properties through a 30-year lease, the agreement is that the leases will be extended for another two 30-year terms later on," he explains. "But contractually, after 30 years, there is no guarantee the seller will honour that agreement."

"This is why many buyers prefer to deal with corporations such as Laguna, Raffles or Shangri-La. The global firms are perceived to be more likely to honour agreements than local individuals."

In Vietnam, the law stipulates that the seller loses his right on the lease once it is sold. When the time comes to renew the lease, the leaseholder negotiates with a state agency for appropriate terms.

In Malaysia, foreigners can own freehold properties that come with a 10-year residency permit.

Simister says he is not suggesting Thailand copy Vietnam or Malaysia, but the authorities should consider how other countries are dealing with foreign ownership issues. He says foreign buyers are also far more likely to accept annual real-estate taxes if they are allowed greater security on their properties. "This could bring added revenue to the country."

Itthi C Tan

The Nation