Phuket Real Estate Market Indian Investors

Phuket real estate market interesting for Indian investors

Indians are following Thailand's success in developing resort properties, especially luxury villas, and its stellar hospitality industry with a view to tap expertise in these fields, says Ramesh K. Hamal, development director of Green Heritage Group which is handling the marketing and sales of Movenpick Residence in Phuket.

Indians want this know-how because Thailand has an established market in high-end hospitality. Mr Hamal has been advising his countrymen on the investment and concept aspects of developing luxury villas and integrating them with hotels, "but we haven't locked up any projects so far."

Some Thai investors, meanwhile, are interested in the former Portuguese enclave of Goa on India's east coast but Mr Hamal noted that while Goa has a lot of potential, finding a good site is very difficult.

As a large number of Indians have now become wealthier, they are travelling more frequently and Phuket is a popular destination. Some Indians have even bought property on the island with a preference for villas.

While it is difficult to work out average prices of properties in India given its size and diversity, Mr Hamal said high-end property in general was probably more expensive than in Thailand.

"It's so difficult to do the average in India because there are so many one-time developers but one way is to check hotel rates ... and hotel rates in Goa are at least one-and-a-half times higher than in Phuket."

At a recent hotel conference in Mumbai, it emerged that the Indian real estate sector needs outside help in terms of the international philosophy of undertaking and managing a project.

Mr Hamal said that overseas residents accounted for only about 10% of the resort property buyers in India but there was demand for quality projects, especially among non-resident Indians. "In India, there are so many people who can buy and there are so many non-resident Indians _ very rich, very powerful, very mobile _ and they do buy and one of their first priorities is to buy in India."

Mr Hamal, whose group is handling the marketing and sales of other projects in Phuket including Katamanda, Kata Heights, Kata Gardens and Serenity Terraces, lamented that sales have been slow of late because foreign buyers are nervous about how the amendments of the Foreign Business Act will shape up. The appreciating baht is another problem for these foreign buyers.

While he believes the leasehold structure is the best option for overseas buyers, he pointed out that many are not comfortable with it.

And even though they can buy up to 49% of the net space in a condominium on a freehold basis, a problem arises in selling the remaining units because in Phuket, unlike Bangkok, the buyer profile is almost 100% foreigners. "And you can offer them 49%, as soon as you hit the barrier, 49%, you still have to sell the remaining 51%, how do you sell them?"

One way is to offer discounts to those acquiring leaseholds and this is generally around 15% to 20%. But even this attractive discount does not sway all buyers.

While intrepid foreigners have found ways around legal obstacles in acquiring land in Phuket, Mr Hamal pointed out it is a cumbersome process.

The looming amendment of the FBA has also had a strong impact with an increase in the number of condo projects.

"Based on Raimon Land's latest second-quarter condo report, there are about 38 condo projects in Phuket but because of this 49-51% problem, and Phuket's buyers primarily being foreigners, I mean there are hardly 1% Thai buyers, so it's a Catch-22 situation."

However, despite the problems prices have not dropped on the island, but Mr Hamal did note a shift with more branded products linked to hotels likely to come into the market. "Phuket will see a big increase in those [branded properties]. Prices _ I won't be surprised if some of the branded quality is very good, 5-6 star residential villas going for more than $5 million."

However Mr Hamal, whose group is from the UK, observed that the key factors for the Thai property market are political stability and clarity on what regulations are in place. If these regulations are investor-friendly then of course Thailand has very good prospects but other countries are also vying for foreign money _ Vietnam and Malaysia being prime examples. Foreigners can now get freehold land in some Malaysian resort areas while Vietnam could become a big competitor in five years' time.

Farther afield, Morocco is a good example of how fast business regulations can be changed to make them investor-friendly. In Morocco the capital gains tax is only 20% and no tax is levied on apartment rentals for the first five years.

Phuket Recovered

According to recently released data by Visa International, spending with Visa cards has exceed pre-tsunami levels in some areas his by the 2004 tsunami.

Visa spending for the first half of 2007 was up on the same period in 2006 for Bali and Phuket by 27% and 21% respectively.

Despite the recovery shown in Bali and Phuket, not all areas in the Asia Pacific region saw strong growth. Of particular interest is Sri Lanka and the southern provinces of Thailand where spending is lower than for the same period in 2006.

The political and civil unrest is to explain for southern Thailand´s decline in spending, while Sri Lanka´s return to civil war in 2006 has seen a decline in spending.

Neighbouring Maldives, another victim of the tsunami, however has shown growth in visa spending, indicating the country archipelago is recovering also.

The increased spending in Bali and Phuket is reflected in the islands´ buoyant property markets. Despite uncertainties in Thailand´s post-coup era, the signs are there for an end-of-year democratic election and industry experts see the real estate industry is now turning the corner.

Koh Maphrao - Coconut Island Real Estate

Those who have been to Thailand’s smoggy capital city wouldn’t normally associate the country with green issues. However, its government and people have begun to implement a number of environmental programmes in order to improve air and water quality and reforest degraded land. It is also keen to adopt energy efficient technologies and to invest in much-needed pollution abatement schemes.

The island of Phuket in the south of Thailand was one of the first provinces to be a pollution control zone, where businesses are made accountable for any pollution they create. Many of the property development companies in the area are already promoting environment awareness and one development leading the way is The Village on Coconut Island (Koh Maphrao).

Thailand’s first dedicated watersports resort, a three minute water taxi ride from Phuket, has implemented many green initiatives, all without diminishing its five star service. Much care was taken in the design of the resort to ensure that as many local materials as possible were used in its making. The designers developed an eco-friendly plan, with villas being built around existing trees and instead of building dividing walls and fences, verdant foliage has been used to ensure privacy, much of which has been grown in the development’s on-site nursery.

The Village has also invested in special water boilers for all its villas which will utilise the heat from the air conditioning condensers to heat the water and therefore use much less electricity.

No noise nor petrol pollution will disrupt island living as cars or motorcycles are banned from the resort, to be replaced with electric golf buggies.

Owners of any of the 132 two to five bedroom villas priced from £250,000 on the islands can be assured that they will have all the amenities and services of a five star resort, without endangering its peaceful, unspoilt environment.

Thailand High End Real Estate Market

The high end Phuket real estate market and that of the rest of Thailand still seems to be developing strong.

Although most home-builders have cut back on their developments, ultra high-end niche-market developers are still breaking ground all over Thailand.

Ultra high-end real estate in Thailand can range from beach-front or mountain villas on Koh Samui or Phuket to large luxurious high-rise condominiums in Bangkok. These types of niche-market homes currently sell for a minimum of Bt35 million.

Benjamin Cha, director of HKR Asia-Pacific, a subsidiary of Hong Kong Stock Exchange listed HKR Interna-tional, said globalisation had led to the emergence of a new group of mobile ultra high-end real-estate investors who want to purchase landmark properties in major cities. Thailand, he said, also had many sophisticated high-end consumers who wanted to be associated with a Sukhothai branded jewel property.

"Many of these people have global professional lives and maybe even global personal lives," he said.

Last week, The Nation visited Koh Samui and noticed that beach-front villas were built all around the island. Many were selling for more than Bt80 million. A long-time resident, John Birt, who is managing director of Samui Villas and Homes, said that most of these villas are owned by overseas European investors.

"We have European owners who live in London and some from Hong Kong and Singapore," he said.

Birt's company manages more than 50 upmarket villas on Samui. "Many of these are rented out for more than 100 days per year," he said.

Another Koh Samui resident, Doris Chiatanasen, the Coral Bay Resort and Spa's managing director, said many high-end overseas investors were still looking at beach-front and mountain villas. "Many of these units are priced in excess of Bt35 million," she said.

Cha's HKR group that owns the five-star Sukhothai Hotel on Sathorn Road is building 196 ultra high-end fee-simple condominium units on seven rai behind the hotel. "The Sukhothai Residences have been designed by Ed Tuttle and Carey Hill who did most of the Aman Resorts," he said.

The Sukhothai Residences, Cha said, is being marketed as an ultra high-end lifestyle-driven condominium that is attached to a five-star hotel. "We want everyone to treat the hotel as their living room," he said.

Cha said the Sukhothai Residences' overall design accentuates its attachment to the hotel. The gardens, pools, health clubs and tennis courts will cover about 60 per cent of the site. "We will have one continuous walkway through the hotel to the condos," he said.

In addition, the home owners will also be able to enter their units through three separate entrances. "They can come via Sathorn, Suan Plu or Soi Nantha," he said.

To enhance their luxury appeal, Cha said all units will have 3.05-metre high ceilings and floor-to-ceiling windows. "We will also offer 24-hour concierge services," he said.

For those who want the ultimate home experience, the Sukhothai Residences is offering nine penthouses that will range from 480 to more than 900 square metres. "We already have four committed local buyers for the penthouses," he said.

Cha said that in addition to globally-oriented overseas buyers, wealthy individuals from hot real-estate markets such as Hong Kong, Singapore and Japan have shown a tremendous interest. "In Hong Kong, a small 100-square-metre apartment in Central will cost you more than Bt35 million," he said.

HKR International in Hong Kong is best known for developing a leisure-lifestyle island suburb on 480 hectares at Discovery Bay. "My grandfather, who originally started in the textile business before branching into property, took over what was a distressed property in the 1970s," he said.

The company began building the Discovery Bay complex on the abandoned rock several decades ago and today more than 17,000 people have made their homes there. "Discovery Bay's schools, marina, residents' club, tennis club, golf course and hotel epitomised Hong Kong's changing lifestyle needs," he said.

People who buy at the Sukhothai Residences, Cha said, will realise a luxurious lifestyle-driven experience that will satisfy all their needs when they are in Bangkok.

Another great company for great real estate developments to look at is Phuket based Leisure Club Asia. This Phuket real estate developer offers unique villas and are currently planning a spectacular condo development in one of the upcoming areas of Phuket.