Define Thai real estate investment

The outlook on an investment in real estate in Thailand depends on the type of Thai property and ownership structure and if the investment is made with an expectation of profit on a future resale or with the purpose of deriving income (rental income) and personal enjoyment from the real estate property in a fixed period of time, or a combination. 

Ownership of land  is generally not open to non-Thai nationals; however, non-resident foreign investors may directly invest in certain property in Thailand, or may structure investment in land and/or buildings through a local Thai company.

Types of real estate properties in Thailand:

• Apartments registered under the Condominium Act of Thailand;
• Apartments NOT registered unde the Condominium Act;
• Land
• House
• Land and house

Types of real estate ownership, rights of use and possession structures:

• Freehold ownership of a condominium unit registered under the Condominium Act within the foreign 49% ownership ratio of such a condominium
• Ownership over a building separate from its land
• A registered leasehold of up to 30 years of:
  • a condominium unit registered under the condominium act
  • an apartment unit not registered under the Condominium Act (as part of a building)
  • land and/ or house
  • land (combined with ownership over the building upon the land)
• Right of superficies (alienation by the owner of the surface of soil of all rights necessary for building on the surface)
• Right of usufruct
• Right of habitation
• Controlling shares in a company that owns real estate

From an investment point of view registered real-estate rights:

Leasehold: A lease agreement includes a variety of options and often aim to give confidence to the investor for future resale, purchase and renewal beyond the original registered lease term. If you make a leasehold investment with the purpose of making a profit on a future sale or assignment of the leasehold an agreement must be reached with the owner of the property. If no agreement can be reached a leasehold is a diminishing asset.

Lease in Thailand is governed by the section 'hire of property' in the Civil and Commercial Code. Proper drafting and registration of the lease agreement is essential.

It is possible to sublease the property if agreed in the lease agreement and to gain income from the property during the lease term. Income can be received from renting out the property.

House ownership: A house can be owned freehold by a foreigner in Thailand. In any long term leasehold structure freehold ownership over the house is recommended, however the right to own a building on land owned by another relates directly to the right to use the land (lease, superficies). When the right to use the land expires the house must be removed or renewal to use the land must be agreed.

Usufruct: A usufruct ends at death of the person granted the right of usufruct. It can’t be passed on to the heirs. In theory a second usufruct in another person's name could continue if registration is allowed by the local land office, and a usufruct can be granted to more than one person. A common argument for a usufruct is that the person granted the usufruct is allowed to lease out the property in this way extend the use of the property beyond the usufruct, however, in case of a foreigners as the usufructuary management is not allowed (e.g. the required registration of the lease). A usufruct can’t be sold or transferred therefore for investment purposes not suitable.

Superficies: The right of superficies (the registered right on the land to use the surface to construct and own a building) can be passed on your heirs. The right of superficies can be registered as a separate right or in combination with a land lease (not a usufruct), lease and superficies complement each other. A correctly structured land lease and superficies can passed on to the heirs.

The lease can even be structured beyond a normal lease based on supreme court judgments giving greater rights to you and your heirs than in a normal lease or hire of property relation. The main element if such a structure is freehold ownership over the building. 

Servitude: The right of servitude (similar to an easement) is more than a contractual obligation between 2 or more land owners, it is a real right that becomes part of the land and is binding on successors and transferee owners of the burdened or servient land. A servitude registered on the land can increase the value of the benefited land and opposite it could decrease the value of the burdened land plot.

Thai company: The only vehicle available for foreigners to actually invest and control a real estate (i.e. land and house) in Thailand is a foreign controlled majority Thai owned Thai limited company. Up till 2006 this was popular method among foreign investors, since 2006 the government is restricting this option and this ownership could be scrutinized under a new policy. 

Condominiums in Thailand: It is 100% legal for foreigners in Thailand to obtain a freehold ownership in a condominium unit in Thailand. In this case the foreigners is free to dispose of the property whenever the market is right, and in this case it is possible to make a profit.

This article and website is offered by Siam Expat Law Co., ltd, a licensed Thai/ English law firm offering licensed online legal services in Thailand (contact us).