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Capital restrictions on property funds are preventing
Thailand from attracting investment, say foreign fund managers.
Chris Reilly, vice-president of the Asian Public Real Estate Association
(APREA), said Thailand was missing opportunities to attract foreign investors
due to the 30% reserve rule imposed by the Bank of Thailand on foreign inflows.
He said that property funds, known abroad as real estate investment trusts
(REITs), were typically classified as low-risk assets, as fund managers were
restricted to investing in completed projects with concrete revenue streams.
The REIT market worldwide was worth around $700 billion, with 150 international
funds worth $1 billion or more each.
Mr Reilly said Thailand was the only country in the region with capital controls
and high taxes.
Singapore, for instance, waives taxes on REITs,
while Hong Kong charges a corporate tax of just 16%. Thai corporate tax is fixed
at 30%.
The Thai REIT market remains in its infancy, with just 16 listed funds and a
market capitalisation of $1.45 billion.
''By regional and global standards, the market is relatively small and illiquid,
but there is potential for it to grow with considerable benefits for investors,
real estate operators and the economy,'' said Mr Reilly.
Suvabha Charoenying, managing director at Thanachart Securities, said of the
listed property funds on the Stock Exchange of Thailand, only two had market
prices over their initial public offering prices.
''This reflects the fact that investors might not yet understand REIT
investments, or possibly the fact that the products aren't meeting investor
needs,'' she said.
Mrs Suvabha said Thai REIT has potential to grow, but that time was needed to
educate investors.
Thanachart plans to launch three property funds this year with a total size of
10 billion baht, including both freehold and leasehold funds.
source: Bkk Post
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