People check out property deals at the 45th House and Condo fair held in March at Queen Sirikit National Convention Center. (Photo: Varuth Hirunyatheb

The Finance Ministry is planning to hold discussions with commercial banks regarding the possibility of extending the home loan repayment period up to a maximum age of 85 among borrowers in an effort to stimulate local demand amid the economic slowdown. 

Finance Minister Pichai Chunhavajira said feedback regarding the
initiative, which began on July 4 through the state-run Government Housing (GH) Bank, had been robust, with more than 80,000 existing borrowers applying.

“Commercial banks are very healthy, but consumers and small businesses are weak,” said Mr Pichai yesterday at a seminar entitled “Developing Thai real estate for sustainable growth”.

“They should share their strength with consumers, particularly homebuyers.” 

Extending the home loan repayment period would help ease the burden of homebuyers amid high expenses and living costs, he said.

The scheme seeks to extend the mortgage instalment plan for civil servants to age 85 and individuals to age 80, up from the current benchmark of 60-70. 

If the mortgage tenure is extended, the instalment amount would decrease.

For instance, for a loan worth 1 million baht, the current instalment payment of 4,100 baht per month could be reduced by between 500-2,000 baht, according to GH Bank.

“The reduction will enable people to have more financial flexibility for their daily expenses and help prevent non-performing loans and special mention loans, which have increased to 3.5% and more than 4%, respectively,” Mr Pichai said.

He said the housing market is in poor shape, on both the demand and supply sides.

Homebuyers are less able to repay debt, while developers saw a drop in sales from local buyers because of the high mortgage rejection rate.

In addition to improving local demand through the proposed extension of the mortgage repayment period, Mr Pichai suggested expanding the leasehold period to 99 years for residential properties to attract more foreign buyers.

“Many foreigners who want to own a house need to set up a nominee company to do so, which drives the underground economy,” he said.

“We should extend the leasehold period to 99 years for residential use, not agricultural use, along with designating specific zones and possibly imposing a higher tax.”

Pornarit Chounchaisit, president of the Thai Real Estate Association, said the residential market has slowed since last year, contracting significantly in the first half this year.

“The key factor was the high mortgage rejection rate from banks, which reached 60%,” he said.

Uthai Uthaisangsuk, president of listed developer Sansiri, said the property market decelerated because of the sluggish economy, but those with high purchasing power continued to show interest.

“Demand in the high-end segment remains strong, while the lower end of the market faces borrowing obstacles,” he said. 

“We observed a mortgage rejection rate of 50% at some sites in the lower-end segment, which has now extended to the middle-priced segment.”

Kessara Thanyalakpark, managing director of listed developer Sena Development, suggested the government provide mortgages with a fixed interest rate for 30 years to specific groups, such as low-income earners, to help make homes more affordable.

“Stimulating the market from the supply side includes not only developers, but also financial institutions,” she said.

“It’s like developers selling toothpaste and banks selling toothbrushes. If toothbrushes are expensive, the toothpaste will not be sold.”