Bangkok Post - Breaking news

Bangkok (dpa) - Thailand's booming property sector has been thrown into confusion by a new regulation issued this month that requires all partly foreign-owned companies to prove the source of their funding before purchasing land, industry sources said Tuesday.

The new Interior Ministry regulation that went into effect on May 25 has already started to slow sales of housing estates in Thailand's popular seaside resorts, such as Pattaya, Phuket, Hua Hin and Samui Island, which have been specifically targeting well-to-do foreigners as vacation getaways or retirement homes. "The property boom ended on May 25," said Ronachai Krisadaolarn, managing director of Bangkok International Associates, a Bangkok-based legal consultancy firm that caters to foreign clients.

Thailand has strict laws prohibiting foreigners from directly purchasing property themselves although loopholes in the law allow them to own land and their houses through long leases or a "nominee company," providing the company is majority Thai-owned. It is common practice for such "shell companies" to include Thai nationals who have been paid to act as nominees to facilitate the deal and who have invested nothing in the purchase.

The new regulation, signed by Suraart Thoingniramol, deputy permanent secretary of the Interior Ministry, is designed to halt the use of such companies for property purchases in the future. "If it appears that an alien holds shares or is a director or it is reasonable to believe that a Thai holds shares as a representative of an alien, the officers shall investigate the income of Thais holding shares, delving into the number of years [they have spent] in the current profession and monthly salary," reads a translation of the law. "The provision of necessary evidence is required."

The new regulation is actually an enforcement of Thailand's existing laws, legal experts said. "It's not a radical change. It's a radical implementation," Ronachai said. The regulation has already started to stall home sales to foreigners, sources said.

"There's a lot of confusion," said Simon Landy, managing director of the Primo Co, a property-development firm. "Some land offices don't know what to do with it, and many have simply stopped transferring land."

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