According to the Bank of Thailand, non-performing loans in the banking industry stood at Bt1.05 trillion or 22.46 percent of total loans at the end of October last year. The transition period will test developers, showing who can survive and adjust to market changes, said Assoc Prof Manop Bangsadadt of Chulalangkorn University. Reforms are taking place in key areas of financing, marketing, construction and after-sales service. Commercial banks which lend money to property developers evaluate risks on the clients debt-servicing ability from cashflow, not just collateral. Previously, banks were caught out when inflated collateral values plunged.
Customers are now more willing to buy as their downpayments are held in escrow accounts.
If the developer fails to complete the project on time, customers can obtain refunds, unlike in the past when developers were able to keep the money. The distressed assets have been acquired from speculators, homebuyers who defaulted on mortgages, and partially built projects relinquished by developers to repay debts. We can t estimate the scale of these assets but their total value may be higher than the brand-new house market this year, the bank said in a report. Sales of new houses may be dented by the increasing popularity of pre-owned units that have become more attractive in price. Last year, Bangkok had 348,068 unoccupied housing units, official figures show, and the figure could increase this year.