Recent years have seen an emerging trend whereby increasingly more investors are showing an interest in establishing real estate investment funds in Thailand. If you’re one of them & considering setting up one of your own, you should keep in mind that doing so requires having a good understanding of the specifics of regulation of investment funds in Thailand. To make your job easier, we’ve put together a short article on what it takes to set up a real estate investment fund in the Kingdom of Thailand.
Thailand: Types of Real Estate Investment Funds
Following the 1996 crisis in the real estate sector, the Thai government has been doing its utmost to provide economic development incentives. In particular, it has amended regulations for establishing mutual funds in Thailand & come up with a scheme enabling the creation of PFPOs in Thailand. Thanks to that, PFPOs have become one of the most popular financial instruments with businessmen seeking to invest in Thailand.
What makes PFPOs particularly attractive for potential investors is that they allow them to partially own large real estate projects by issuing & offering investment shares. Funds raised that way are used to refinance existing projects & ensure the development of new ones. Because of that, investors are able to earn more profits than they would if they developed traditional real estate projects. PFPOs have also become a popular investment vehicle for Thai real estate developers due to tax incentives provided by the Thai government.
However, establishing an investment fund in Thailand, and more specifically, PFPOs, has some disadvantages to it, too. For example, PFPOs do not correspond to similar types of investment schemes used internationally. Therefore, potential investors seeking to set up a real estate fund in Thailand are recommended to consider investing in another popular type of investment funds - REITs.
Being more widespread, REITs represent an investment vehicle based on a simpler & more transparent scheme. If you are interested in registering a fund in Thailand, you should keep in mind that while REITs and PFPOs share the same fundraising goals and concepts, REITs do not have a legal personality status. In REITs, property is owned by trustees, and beneficial owners act as trustees.
Operation & management of REITs and PFPOs is governed by a set of specific laws & regulations. Given the 2014 ban on creation of new PFPOs & capital increases in PFPOs. REITs have been the preferred investment scheme of investors since early 2020.
Thailand: Managing REITs
Being trust schemes based on the Capital Market Fiduciary Act. REITs cannot be considered corporate entities. Accordingly, owners of assets are formally considered REITs’ trustees.
If you’re considering creating a fund in Thailand, you should keep in mind that in the case of REITs, invested assets consist of:
- real estate;
- shares of companies owning real estate.
What makes REITs attractive to investors is that they can borrow money and use assets as collateral. Another advantage of setting up an REIT in Thailand is that it provides investors with an opportunity to raise funds by issuing bonds.
And that wraps up our short review of Thai investment funds. If you have any questions regarding the topic of the article or are seeking legal advice on regulation of Thai investment funds, you’re more than welcome to contact IQ Decision UK. Our team of highly qualified experts will be happy to fulfil all your legal needs & deliver the result you’ve been looking forward to achieving.