The government is being urged to waive the special business tax for property transactions between cash-strapped developers and new investors to avoid possible non-performing loans (NPLs) as the fallout from Covid-19 hits the economy and property market.
Pornnarit Chuanchaisit, president of the Thai Real Estate Association (TREA), says the number of developers with financial liquidity problems is on the rise as demand continues to shrink.
"Residential developers are struggling as the purchasing power of homebuyers drops," he said. "They still have demand but are unable to get mortgage loan approval due to the economic slowdown."
As projects, mainly condos, have a low sales rate or are unable to sell or transfer units, developers with high debt or loans to repay are under financial pressure.
"Some developers with such problems have offered their projects to peers to take over and continue development," Mr Pornnarit said. "This phenomenon is in an upward trend, as there is no sign of an economic recovery."
He said there are developers who want to sell their projects and those seeking a good deal by acquiring projects from others, as developers today include some with health and strong finance and others who struggle.
To promote transactions, the TREA said the government should waive the special business tax, which charges 3.3% of property value when a property is sold to others within the first five years of ownership.
"Condo projects whose developers have financial problems should not be left unfinished, as they will become NPLs leading to a burden on financial institutions," Mr Pornnarit said. "The worst impact will occur to buyers who made a down payment and eventually do not get a unit as promised if the project is suspended."
He said the impact from Covid-19 on the economy and property market could be substantial because a vaccine may take a long time.
"Some contractors are billing construction fees for a condo project by the unit, not the whole project, as developers have financial problems," he said.
"The government should do something to boost economy," said Mr Pornnarit, who was among the representatives from the property sector who met Prime Minister Prayut Chan-o-cha last month.
They asked for many stimulus measures, including a relaxation in lending curbs to help homebuyers get mortgage approval more easily.
Mr Pornnarit said the property incentives such as a reduction in transfer and mortgage fees from 2% and 1% to 0.01% each for a residential unit priced at up to 3 million baht should be revised.
"The incentives should be given for every price, as middle- to lower-end buyers are affected by the economic slowdown but upper-end people have overwhelming deposit money that they should be urged to invest," he said.
He suggested the reduction of the transfer and mortgage fee be made available for any unit price.