Property Ownership for Foreigners: The do’s & don’ts and the alternatives
"Can I buy property in Thailand?"
Thai property laws are a topic of concern for international property buyers, saying it's "confusing" or "convoluted". But don't worry, buying property in Thailand is relatively straightforward and the laws aren't as difficult to follow or understand as you think. Today, we're going to give you a brief walkthrough of the different Thai property laws, the restrictions, and details of foreign property ownership in Thailand.
Is it possible for foreigners to buy property in Thailand?
To answer that question, plain and simple, it IS legally possible for foreigners to buy property in Thailand. Foreigners are allowed to own property with some restrictions. Foreigners are allowed to own condos but are prohibited from entirely owning land (such as villas or townhouses).
Foreigners can follow these three rules on property ownership in Thailand:
- Foreigners can own condos.
- Foreigners can't own land in Thailand entirely.
- Structures and buildings located on a plot of land, however, are permitted.
The easiest method of a foreigner owning real estate as well as having their name registered on the title deed (known in Thai as "chanote", โฉนด) is to actually buy a condo. Make sure to also verify that the title deed is real and that it is indeed designated as the official title deed of the actual property, all of which can be done at the land department.
Note that over the years, foreign buyers and lawyers have been able to come up with alternative measures towards ownership structures to get around the strict Thai property ownership restrictions. These alternatives offer "indirect control" over investments and enjoyment of land ownership benefits.
Can foreigners own villas, houses, or townhouses, or land?
As stated before, foreigners are legally prohibited from owning land under their name in Thailand. Fortunately, Thailand's legal framework offers some ownership and control alternatives to foreigners. While direct ownership and title deed registration is not possible, alternative holding structures allow foreigners to enjoy and "indirectly" control land usage.
The most common methods of ownership structures used for "indirectly" owning or enjoying landed property usage are usually buying a leasehold or buying property through a Thai company.
Foreigners' land acquisition for residential purposes
A foreigner bringing in money of no less than 40 million THB (1.13M USD at the time of writing), as specified in the Ministerial Regulation, into the Kingdom of Thailand for investment may apply for acquisition of land, not exceeding one rai, for residential purposes provided that permission has been granted by the Minister. According to section 96 bis of the land code, the land acquisition application must comply with rules and conditions established in the Ministerial Regulation. Furthermore, the land size in any acquisition for residential purposes must not exceed 1 rai (1600 sqm.).
Foreigners' land acquisition for commercial purposes
Any promoted company with 50% and above foreigner-held shares may apply for land ownership by submitting any relevant forms to the Thailand Board of Investment (BOI). When the land acquisition has been approved successfully, the BOI will then issue a letter of approval to the applicant and the Department of Land (or provincial governor) would be notified as well.
The three simplest ways for a foreign buyer to own property in Thailand
1. Buying a condo
Buying a condo is the simplest and most hassle-free method for foreigners to own a property in Thailand. Foreign owners of the condo will be registered on the title deed and will benefit from a special freehold title known as the "Condominium Freehold" title.
Simply put, the Condominium Freehold Title is the division of a residential building into individual condominium units, each of them benefiting from co-ownership of common areas and co-owner association (such as juristic management office or building amenities).
In compliance with the Condominium Act B.E. 1979, condos are required to ensure that only 49% of the condo's registerable area can be foreign-sold (also known as Foreign Quota), while the remaining 51% must be Thai-owned. If the foreign quota of the condo is sold out, foreigners can only acquire condo units in the building on a leasehold basis.
2. Buying Leasehold Property
One alternative is to simply acquire land on a leasehold basis, in which the maximum lease on land period in Thailand is 30 years (with an addition of two subsequent renewals, making the total lease 90 years).
Despite a leasehold not offering ownership rights, it does offer the leaseholder exclusive rights to the use of that property. Leasehold rights are registered on the title deed and will easily allow the foreigner to enjoy a property without the hassle of ongoing additional paperwork.
This solution may be intriguing for retirees looking for a holiday home.
3. Buying property through a Thai company
Certain buyers might prefer a holding structure with more ownership rights as compared to a leasehold title. In this case, foreigners can set up a Thai company for property acquisitions, this method sitting in the "grey area" of the Thai legal system. However, this method is not recommended by the Thai government and land offices overseeing overseas property transfers.
For a company to be considered "Thai Entity", at least 51% of the shareholding must be Thai-held. The authorities' main concern is that the unauthorized use of "Nominee Thai Shareholders" are essentially "Fake investors" used to facilitate property acquisitions.
Provided that foreigners comply with the law (using real shareholders and/or Thai partners), however, this options also offers a good degree of indirect ownership and control. This ownership structure is typically used by investors to buy landed property such as villas with a spouse or foreign developers acquiring developable land plots.
4. Factors to consider for foreign land ownership
The following are other requirements for foreign land ownership in addition to the maximum investment of over 40M baht or the 49-51 ownership ratio:
- The investment must remain in Thailand for over five years.
- Permission must be granted from the Ministry of Interior.
- Land size for industrial or agricultural purposes must not exceed 10 rai (16000 sqm.).
- Invest must be buying Thai government bonds, buying Real Estate Investment Trust (REIT), or investing in a BOI-promoted business.
Why does Thailand impose these foreign property ownership regulations
Though these regulations may seem strict and inflexible, they are in place to protect Thailand's social and economic development.
First off, the regulations are in place for the protection of certain strategic national interests, most notably agricultural land (protection of food supplies) and land with mineral deposits (mineral deposits, for instance).
Secondly, the Kingdom's real estate, even in the capital of Bangkok, is relatively affordable and is a potential influx of overseas investors could bring an unintentional property price inflation.
In order to avoid such situation in London, Hong Kong, or New York where property prices have risen as a result of international buyers, Thailand enforces these laws in hopes to maintain balance and minimize disruption, ensuring no Thais are displaced and "priced out" of their housing needs.
Potential changes to foreign real estate laws in Thailand
The economic shock as a result from the COVID-19 pandemic has sparked a potential change in foreign property ownership laws in 2021, with proposals for a change serving as an opportunity revive the affected real estate market in Thailand.
Changes to the 49% foreign quota ratio
Foreigners could potentially be allowed to own between 70 to 80% of the condominium, albeit with some restrictions on annual general meeting voting rights.
Foreigners might be allowed to buy landed property
The landed properties would have to be part of a "housing project" and would be subject to the foreign quota ratio in which only 49% of a low-rise housing compound may be foreigner-owned.
Land lease extensions
Land leases could potentially be extended from the usual 30 years to 50 years.
Are these changes confirmed?
Despite being a good sign for Thailand's real estate market, keep in mind that these legal changes are merely speculation at this point. The idea of foreign real estate ownership is a relatively controversial topic. Thailand is still facing a third wave of COVID-19 and the Thai government's attention is likely to be more immediate.
Should foreigners buy condos or landed property?
It all comes down to the buyer's personal lifestyle preferences or investment plans.
Landed property tends to offer excellent value on a price-per-square-meter basis, with an additional advantage in the form of greater control over the land and building. On the other hand, due to the shared nature of condos, renovation and privacy can be severely restricted.
Conversely, condos offer the simplest and flexible property type, allowing a hassle-free acquisition with a straightforward "exit strategy" for foreign buyers. As a result of essential support services provided by the condo such as security, key-holding services, and maintenance, they tend to be attractive turkey rental investments. The convenience and flexibility offered by condos make it an excellent choice for various foreign buyers.
Conclusion
If you have made it this far in the article, then you'll know that buying property in Thailand for foreigners is nowhere as difficult or intimidating as it seems, even with the remaining placement of the existing Thai real estate laws and regulations. All you will need to do is remember to follow the rules and you should be able to buy your desired properties easier than you expect!
Have further questions? Contact us!
We hope we answered most, if not all of your questions regarding foreigners' guide to buying property in Thailand. However, if you still have further questions, don't hesitate to speak up! Our property consultants will be very happy to assist you. In the meantime, let us know what you think in the comments below!
