As many as 80% of loan applications for the state's low-cost housing scheme have been rejected, a hurdle that could force some project developers to stall plans amid subdued demand.
If the new government wants to continue the scheme, it should consider relaxing borrower qualifications to give low-income earners better access to financial sources, said a source at the Treasury Department.
To comply with the military-led government's policy under the low-cost Pracharath Thai housing scheme, the department invited the private sector to develop residential projects targeting individuals with an annual income of 100,000 baht or less. Tenants would lease residential units built on state land.
For unoccupied units, those earning up to 35,000 baht a month would be allowed to lease them before they would be offered to the general public.
The source said the Treasury Department will talk with the Bank of Thailand about easing financial institutions' lending requirements for the low-cost housing scheme and accepting losses that could happen in the future from lending under the scheme.
Rejected applicants' qualifications did not meet the central bank's lending criteria and bank executives who approve subpar applications could be legally culpable if the loans turn sour.
GH Bank president Chatchai Sirilai earlier said that most loan applicants to buy the cheap homes cannot afford the minimum payment. GH Bank and the Government Savings Bank are lenders for the Pracharath Thai housing scheme.
Few property developers are interested in bidding to develop the low-cost housing projects and some auction winners could stop development as they are required to sell at a maximum of 1 million baht a unit and pay 3.3% specific business tax and the projects must have common areas, the source said.
A system under which low-income earners can choose to buy homes in areas that are convenient for them is the suitable approach for the low-cost housing development, the source said, adding that the state could help low-income earners by loosening lending criteria and subsidising some interest costs to make home purchases affordable.
Among the aspects of the Pracharath Thai scheme, a project in Chiang Rai province is expected to receive a warm welcome from buyers, given the good location and low construction costs.
The source said projects in Chon Buri and Nakhon Phanom failed to attract auction participants because construction costs are expensive, particularly in Chon Buri, where soil to fill land costs as high as 1 million baht per rai.