Leasehold Property Registration in Thailand

What Is Leasehold?
There is no direct translation into Russian. It can be approximately translated as a long-term lease, or, more precisely, long-term possession. The term “possession” is used because, for the duration of the ownership term, the buyer receives documents similar to those received by a Freehold buyer (perpetual ownership). The ownership term is limited to 30 years; however, developers and sellers arrange additional agreements that allow the owner to extend the term of possession for up to 90 years.
Today, buyers from Russia prefer to purchase apartments on a Leasehold basis. Over approximately the past three years, Russian-speaking real estate agents and developers have been learning how to sell Leasehold, as its advantages for Russian buyers have become even more apparent.

Why Will Chinese Investors Buy Leasehold, Just Like Freehold, Over the Next 2–3 Years?
Many Chinese developers have now invested in construction projects. Previously, they acted as agents and sold whatever was easier to sell. Now, they will face a problem that prevents them from effectively selling their projects. Ultimately, Freehold buyers will be affected, because both forms of ownership are part of the same project.

Advantages of LeaseholdInvestment (Buying with the Goal of Recouping the Investment and Reselling)
It is important to understand that the overwhelming majority of real estate transactions in Phuket are made for investment purposes — that is, with the goal of generating profit. When you invest in real estate, the most important factors are the risks and the time required to recoup the investment. Investment property is not purchased forever. Therefore, the key factors driving a purchase are the property's liquidity and the time required to exit the investment.
Even a 5% annual return and 5% capital appreciation will allow an investor to recover 100% of the initial investment after 10 years. In other words, for 10 years, the property generates passive income and pays for itself; after that, it continues to generate profit. In this way, the investor preserves and accumulates capital. Over time, the capital appreciation resulting from rising land prices in a properly selected area will sooner or later begin to decline due to the aging of the building. It is reasonable to expect buildings in coastal areas to remain in good condition for 20–30 years. After that, major renovations will most likely be required.
Under these conditions, a more or less reasonable investment strategy is to sell the property 10–20 years after purchase. When purchasing a property in the “WeKata Luxury” project, we offer a buyback option that allows investors to plan their exit from the investment after 8 years.

Leasehold Is Not Limited to 90 Years (What Happens After 90 Years?)
Leasehold is not limited to 90 years. First and foremost, it is worth considering what condition the building will be in after 90 years. Will you own this property for all 90 years? The 90-year limitation is not a whim of the developer; it is a way to provide the buyer with perpetual ownership. Our contracts provide for the Leasehold term to be “reset” if the owner resells the property. The only requirement is to pay a 1.25% tax. Developers are not seeking to take the property back after 30 years, but by law, they are required to register Leasehold ownership for a limited period of time.

Leasehold Is Safe (Registered Under the Same Conditions as Freehold)
Leasehold and Freehold are both registered with the Thailand Department of Land Resources. Both types of ownership involve receiving the same documents, are protected by Thai law, and have equal legal force. It should also be understood that 51% of the units in a single project are Leasehold. The 49% Freehold quota limits foreign ownership in a single project and exists to comply with Thai land ownership laws. In any case, all property owners have the same voting rights in the condominium.
For Russian buyers, Leasehold is equivalent to a rental arrangement, so there is no need to declare the property as an asset. Rental income can be received in cash through a bank in Thailand, for example, once a year, which may also be relevant in some cases.

Supply and Demand — Why Is Freehold More Expensive?
Unfortunately, most investors misunderstand the meaning of Freehold and are willing to pay more for it, so developers raise the prices accordingly. Leasehold is not cheaper, but Freehold prices are artificially inflated due to higher demand. The cost of construction is the same for all units, so when investing, it makes more sense to choose between projects and locations rather than between ownership types. You may think that Freehold will be easier to resell, but ultimately, a Leasehold apartment purchased at a lower price will have a faster payback period. This is because the form of ownership has absolutely no significance when it comes to renting out the property.
If you buy an apartment in a condominium with hotel management, the hotel is also interested in generating greater profits in the future, so it does not matter to them which type of ownership the apartment is registered under.

Leasehold Tax
The tax on Leasehold is much lower: for Leasehold, it is 1.25% of the property value, while for Freehold, it is 5.5%. Currently, Thailand has only one property tax — the registration tax. There is a possibility that in the future, the government may introduce a tax on apartments owned by foreigners, as the number of apartments registered as Freehold continues to increase. But for now, these are only assumptions.

Conclusion

1. Investment property is intended to generate rental income. Registering an apartment as Leasehold is cheaper, while the rental income from Leasehold will be the same as from Freehold, meaning the payback period will be shorter.
2. Leasehold, just like Freehold, is a safe form of ownership. Leasehold and Freehold apartments are part of the same project. Leasehold is registered in the same way as Freehold, with the same documents and the same legal force.
3. Ownership of a property registered as Leasehold has no limitations if all agreements are properly drafted. The agreement is renewed after the property is resold to a new owner.

For additional information, please contact us using the details below:
By phone / WhatsApp: +66821077912
By email: sales@phuket9.com