On March 22, 2016, the Cabinet approved the “Pracharat Housing” program that offers soft loans to residential property developers and low-income earners nationwide, including civil servants and workers with irregular income, to help them own their first homes. With it, property developers are required to shoulder certain expenses that account for about 6-7 percent of the total home price. Also, financial institutions must raise the debt-to-income ratio for home applicants to between 50 and 80 percent.
We at KResearch are of the view that the “Pracharat Housing” program will help increase demand for as many as 33,000-40,000 homes priced below THB1.5 million each and homebuyers may require a mortgage of THB1 million or more. Importantly, residential property developers will be able to release homes in their inventories costing below THB1.5 million each.
However, developers will likely continue to be pressured by persistent sluggishness in the property sector because housing demand should soften after government stimuli expire amid economic risks that may cause some prospective buyers – especially low-to-medium income earners and those with irregular income – to postpone home buying. Over the long-term, close attention should be paid to the debt-servicing ability of homebuyers having high debt-to-income ratios. Consumers are advised to thoroughly study the details of the “Pracharat Housing” program and assess their long-term debt-servicing ability before undertaking a mortgage.
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