Thailand’s tricky remittance law leaves Hongkonger with a US$120,000 hole in its pocket after the Phuket developer went bankrupt during Covid-19

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It’s all gone, my money that I worked hard to save. It’s a costly lesson for me, Abouhanine said. If the Thai government cares about its image or tourism, it should complete the project and give us our keys.

Investors will have to work with the new owner of the land, a situation for which Abouhanine feels desperate. In limbo, she must agree to now own a home in an unfinished building. Switzerland, however, hopes its story will serve as a cautionary tale for Hong Kongers investing in off-plan property in Thailand.

03:02

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Under Thailand’s consignment law, the consignor or owner of the land can sell the land to the consignee or the buyer. Title will pass to the consignee once the transaction is registered at the land office. The particularity of the consignment is that the sender has the right to buy back the land within an agreed period and at an agreed price.

The original intention of the laws was to enable landowners and investors to obtain a mortgage and was useful for landowners who needed credit but did not have access to banking services, for example in rural areas, a said Somsak Chutisilp, Managing Director of IQI Globals in Thailand. IQI is a network of agents affiliated with the Malaysian proptech company Juwai IQI.

Until 2019, consignment was risky for borrowers, who were generally financially unsophisticated and too often ended up losing their land, Somsak said. In 2019, the government introduced a new consignment law to provide more protection for landowners by limiting interest rates and making other changes. These changes protect borrowers but make consignment less attractive to lenders.

A Chinese tourist rides an elephant in a jungle park ahead of the Lunar New Year in Phuket in January 2023. Photo: Reuters

Foreigners were never eligible to participate in consignment transactions, he said. Those who got into trouble under the law were unsuspecting landowners who had few other resources and borrowed large sums of money.

Panisa Suwanmatajarn of Thai law firm The Legal Co said that since Phuket is popular with foreigners and attractive plots of land are limited and available at very high cost, it is not unusual for developers with insufficient funds to buy land on consignment, splurge on marketing to attract investors and use their down payments to repay the cost.

Then the developer will apply for a loan from a bank citing the number of investor reservations, Panisa said. If sufficient funds are obtained and used for the construction of the project, everything will be fine. On the other hand, if something goes wrong, the project will collapse.

The project Abouhanine has invested in, Himalai Oceanfront Condominiums, is one of four major developments undertaken by Blue Horizon near Kamala Beach, along a strip on Phuket’s west coast known as Millionaire Mile.

The Posh Twelve, another unfinished real estate project in Bangkok, saw more than 200 Hong Kongers lose more than HK$4.8 million ($611,481) in deposits when construction halted in 2020 due to the pandemic, and the promoter filed for liquidation.

Investors interested in buying Thai property should only consider completed projects or off-plan projects that have received an environmental impact assessment (EIA) from the government, said Jason Choi, project manager in Thailand. at Raeon International, a specialist in real estate investment abroad.

An artists impression of Himalai Oceanfront Condominium. Picture: handout

It’s not easy to get an EIA approval, and the developer can’t start construction until they get the approval, Choi said. Investors should always go to the actual site to see for themselves, instead of relying on pictures alone. Selecting big brands or developers who are gearing up to be listed is always a safer choice.

Finding a trusted partner is always key to a prudent investment, said 46-year-old Frenchman Nicolas Morineaux, whose company owns and operates Villa Malouna in Koh Samui. He rents the property to tourists and guests.

Trust is key, Morineaux said. Also, always keep your logical business sense. Many tend to be mesmerized by the beauty of the landscape and forget the essential steps they would have taken in a big modern city.

Another tip is to ask questions, such as how the land was measured and the sources of electricity and water, the legal framework and construction quality standards, he said. Finally, respecting local rules is also essential, Morineaux added.

Investing in Koh Samui is like choosing to invest in the international equity market, it’s riskier than buying bonds, but much more rewarding if you surround yourself with good advisers, Morineaux said. The resale market is also less liquid.

Overall, the Thai property market is likely to offer good investment opportunities for those who have done their homework, said Kashif Ansari, co-founder of Juwai IQI and group CEO.

Thailand is one of the world’s most affordable destinations for luxury real estate, he said. Luxury apartments in the Thai market that are popular with foreigners start at around US$100,000. This compares favorably to other Southeast Asian destinations.

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