Stricter laws could stifle real-estate boom

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Stricter laws could stifle real-estate boom

Tuesday, 06 May 2008

source: The Nation/Dr Teerachon Manomaiphibul May 5, 2008

Real estate is one of the most regulated industries in Thailand.

Although strict regulation makes a lot of sense for an industry that has a direct impact on people's lives, excessively strict regulations can hurt its growth and prosperity.

Strict zoning regulations, issued in 2006, have made the development of new projects costlier and more time-consuming. These regulations cover floor area ratio; gross building area per land area ratio; open space ratio; and open space per gross building area ratio.

Meanwhile, the Environmental Investigation Agency has become stricter. This change in stance is affecting many residential projects because the Environment Impact Assessment (EIA) approval process is time-consuming. This can cause a significant reduction in the internal rate of return for the project.

If the developers are to retain the required return, the increased cost will eventually be transferred to the customers.

The Natural Resources and Environment Committee also revised the laws for the Environmental Investigation Agency. The key differences are:

- The new EIA criteria applies to any building covering more than 2,000 square metres.

- The new criteria is applicable to projects covering more than 10,000 sq m.

- Projects with 250 subplots or more, or area over 100 rais are also covered in the EIA.

We recommend setting up a one-stop service to reduce the time in which a permit can be issued, and having one ageancy where the EIA submission can take place. These measures will make the process more convenient and reduce the cost of construction. There is already a proven example of one-stop service within Thailand with the Industrial Estate Authority of Thailand.