Construction permit withdrawal sparks caution in Thai property lending
The property developer community has been unsettled by the recent Ashton Asoke saga, wherein the construction permit was withdrawn, prompting lenders to proceed with caution when issuing debt instruments and loans to developers.
AP Thailand’s chief executive, Anuphong Assavabhokhin, explained that it’s becoming increasingly challenging to secure loans as financial institutions grow wary of extending credit to real estate companies due to the consequences of the Ashton Asoke episode. Additionally, the issuance of debt instruments is also expected to become more complex.
Particularly detrimental could be the impact on medium-scale residential developers who have previously issued debt instruments and are close to rolling over their debts, Anuphong noted.
Posing a question to the industry, he suggested…
“If debt roll-overs cannot be executed by these developers, might we find ourselves facing a crisis similar to 1997?”
Several companies, to avoid bank loans, prefer to issue debt instruments. If these companies fail to secure loans and are unable to roll over these existing debt instruments, a significant crisis might be looming over the industry, suggested Anuphong.
The Court of Administrative Justice on July 27decreed an order to rescind the notification of intentions for the construction or modification of the Ashton Asoke building. The 50-storey project, which costs 6.4 billion baht, involved a joint venture between Ananda Development, a SET-listed developer, and Mitsui Fudosan, a Japanese developer.
The court concluded that the land on which the condo is located doesn’t comply with the Building Control Act, as it does not have at least one side with a set minimum length of 12 metres adjacent to a width of 18 meters of a public road, and hence cannot house an extra-large building.
The court verdict had a domino effect as it caused disruptions for other developers such as Noble Development Plc, which were forced to deal with questions from clients about any possible similarities with the Ashton Asoke case.
Thongchai Busrapan, Co-Chief Executive of Noble Development, clarified that they utilised lands based on their original physical conditions, without any changes, modifications or relocations, when submitting environmental impact assessment reports and construction permit requests.
Thongchai voiced…
“The Ashton Asoke case compelled us to render explanations not just to the media and our clients, but also to credit rating firms like Tris Rating,”
Thongchai also highlighted that the case has left a mark on the entire Thai property sector, as the project was a collaboration between a Thai developer and an overseas investor, Reports Bangkok Post.
