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The measure controlling loan to value ratio (LTV) for condominiums has changed to only allowing no more than 90% of loan to value from originally allowing full value of the condominium which is effective from January 1, 2012 onwards. If financial institutions release condominium loan at more than 90%, risk weight at 75% must be used instead of 35%, which will cause financial institutions to maintain more fund to support the increased risk which affects the cost of commercial banks. The enforcement of such regulation resulted in dramatic decrease of new launches for condominium projects in early 2011. For horizontal housings which originally set the LTV regulation at 95% from January 1, 2012, but later postponed it to another year to January 1, 2013. Governmental Measures Stimulating Real Estate Business: Previously, the public sector established various measures in order to support the growth of the real estate business, such as: 1. Soft Loans Project for assisting flood victims by releasing loans with the limit of 300 billion Baht for all projects. It was the loan project for repairing or purchasing new residences with the low interest rate of 3.0% per year for the period of 5 years. 2. First-home Scheme of the Government Housing Bank with the limit of 20 billion Baht for all second projects. It was the loan with the low interest rate of 0% per year for the period of 3 years. The purpose of such loan was to purchase residences or building in the amount not exceeding 1 million Baht. 3. Personal Income Tax Deduction Policy for repairing residences affected by the flood crisis. The amount of the tax deduction was not over 100,000 Baht. 4. Personal Income Tax Deduction Policy for first home valuing below 5 million Baht. 10% of home price can be deducted the tax for the period of 15 years. Investment in large projects of the public sector: According to the governmental plan of the infrastructure investment; such as, railway mass transportation system, both the expansion of new route and its extension, and the high-speed train project for building the network throughout the nation and supporting the approaching freedom opening under the framework of AEC, and the investment in the construction project of sustainable flood protection system, etc., it is considered to be the positive factors to the overall economic system of he nation and the real estate industry. Lack of Labor: The unemployment rate has been low for a long time in Thailand. Previously, the business sector, including the real estate sector, faced with the problem of labor shortage. It partly resulted from the growth of the domestic economy and the growth of construction and real estate industry. In addition, in 2012, the agricultural sector grew up well due to the price guarantee policy of the public sector. As a result, labors in the construction sector moved back to their hometowns for operating agricultural careers. This greatly resulted to the lack of labors. This problem is estimated to be the negative factor to the real estate industry until the year 2013. However, entrepreneurs adjusted and dealt with this problem, such as, application of new construction technologies for reducing labors, etc. Construction cost: In the past few years, the construction cost increased consistently, both the cost of construction materials and labor cost. For the price of construction materials in 2012, it was found that overall average price increased from 2011 by about 3.57% (according to construction materials price index of Ministry of Commerce). Categories that increased quite a lot in 2012 are; cement which increased by 16.00%, and other construction materials which increased by about 9.40%. Meanwhile, the cost of minimum wage increased in accordance with the policy of the public sector. The minimum wage was 300 Baht per day and it was effective in 7 pilot provinces from Aril 1, 2012 and then in all provinces of Thailand from January 1, 2013. Such minimum wage adjustment will affect directly and indirectly to the construction cost. For the direct impact, only unskilled labor will experience it which the number of such labor is not much. For the indirect impact, the production sector will have increasing cost, possible leading to higher prices of products later.
Annual Report 2012 Lalin Property Public Company Limited
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