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Thailand's Government Housing Finance Policy
A Speech to the Participants of the 2nd International Study Visit –
Real Estate in Bangkok and Pattaya, July 17, 2003

Assistant Professor Dr. Roongrueng Bhidayasiri
Ph.D., DIC, B.Eng.,C.Eng.,MIEE
Advisor to Minister of Finance.
Member of Parliament

Asst. Prof. Dr. Roongrueng Bhidayasiri, keynote speaker (second from right)
Sopon Pornchokchai, President, Thai Appraisal Foundation (right)
Ballobh Kritayanavaj, SVP, Government Housing Bank (left)
John Cirincione, a participant from the Appraisal Institute, Chicago (second from left)

Distinguished participants;
Ladies and Gentlemen,

It is my great honor to be here tonight. I would like to express my sincere appreciation to Dr. Sopon Pornchokchai, President of the Thai Appraisal Foundation for inviting me to speak at this forum. I am confident that a forum like this one will help contribute to the development of the housing finance system.

Ladies and Gentlemen,

I would like to focus my remarks tonight on the Thai government's housing finance policy—where we are today and where we aspire to be tomorrow.

I am certain that you would agree with me that, homeownership and affordable housing finance is crucial to a well-functioned economy and society. Housing is one of the four necessities in life, besides food, clothing and medicine. In economic terms, homeownership is the first step to financial security for most people. Access to affordable housing, thus, is key to this first stepping stone. Financial security then leads to an establishment of strong and stable communities, a basis for better quality of life.

The Thai government has put forth homeownership and affordable housing finance as one of its policy priorities. Our Prime Minister, Dr. Thaksin Shinawatra, has often stated his vision that all Thai households will be homeowners within the next five years. Moreover, homeownership supports another main policy priority to mobilize assets into capital. As people have rights in their properties, they will be able to better access other financial products. Highly valuable in the market economy, such access encourages private investment as well as entrepreneurship.

To make the homeownership vision come true, we realize that housing finance sector is a key part, and, thus, we are dedicated to making housing affordable for people. By providing “best quality” financing, management, information, and other appropriate assistance, the government's Specialized Financial Institutions (SFIs), especially the Government Housing Bank, facilitates affordable mortgage financing. By “best quality”, I mean shorter loan procedures, less working steps, larger loan size compared to collateral, better service such as efficient call centers and good risk management system. The government itself, through the arm of the National Housing Authority, assures the continued availability of low-income housing by introducing Homes for the Poor Program (Baan Aua-Arthorn), aiming to build 600,000 units of new housings in the next 5 years.

Ladies and Gentlemen,

I would like to give you some clear examples of our policy implementation to provide housing finance and to improve our housing finance system.

On the measures to facilitate mortgage financing, we have launched many housing loan programs such as the Government Housing Bank's mortgage loan program for civil servants and state-owned enterprises' employees and the Government Savings Bank's mortgage for low-income people. The Government Housing Bank program for civil servants and state-owned enterprises, initiated in 2002, was highly successful. Low interest rate as well as long maturity of these loans has been highly conducive to borrowers. The program currently finances 26.7 billion baht worth of mortgages. The success of these loan packages has induced many commercial banks to offer comparable loans, giving the consumers more alternatives.

Starting this year, under the Homes for the Poor Program, the Government Housing Bank and the Government Savings Bank will also support the scheme by providing mortgages. It is expected that the mortgages under this program will amount to around 60 billion baht for the first three phases of the program.

On the measures to upgrade the housing finance system in the medium term, we have initiated an establishment of the National Real Estate Information Center. This center will not only be the central real estate database of the country, but will also be one of the main property appraisers. I myself see this information center a critical success factor in developing our housing finance system. Why do I believe so? Please let me elaborate on the objectives and the benefits of this Information Center.

The main objective of this Information Center is to supply information and data required in making important decisions in the housing finance system. Financial institutions, policymakers and real estate developers will all benefit from the establishment of this Center. All three parties will be able to access the current demand and supply of each real estate types. The database will serve as an early warning system for an oversupply of real estate development and will assist financial institutions in making its decision to lend to real estate developers and individuals.

By the concept of “economy of scale,” the central database will ease the costs of data collection and collateral valuation born by each individual bank. Financial institutions can access current information on the dynamic of Thailand's mortgage market. The most updated appraised property value included in the database of the Information Center will be highly worthwhile. This information is crucial for the decision to lend, to refinance, and to determine loan to value ratio; it is inevitable for a good risk management system.

Besides the National Real Estate Information Center, another important measure to develop Thailand's housing finance market is the development of securitization. Economy-level action plan to overcome impediments in securitization development has been established under the APEC Finance Minister Process. The plan will be endorsed and reported to the APEC Finance Minister Meeting this coming September.

Ladies and Gentlemen,

In the year 2002, we saw a nice pick-up in the real estate and housing finance market as a result of better economic condition, lower interest rate and government programs. In the Bangkok Metropolitan Area alone, new housing projects launched in 2002 grew 114 percent from the year before. New mortgage origination for the whole housing finance market amounted to 164.9 billion baht in 2002, 46.5 percent higher than the year 2001. For the first quarter of 2003, the new housing loan origination totaled 50.5 billion baht, representing 71.8 percent year-on-year growth. Our current survey also showed that Thailand's housing demand is still very strong and can expend up threefold. This is in line with many regional surveyes from respectable research houses. Therefore, we can be quite ambitious in targeting growth in real estate and housing finance market.

With the strong growth momentum and the low interest rate environment, we expect strong growth in both the real estate and the housing finance market for the rest of this year, as seen by continuous credit growth in the first quarter, partly due to the government schemes mentioned earlier. The specialized financial institutions still carry on the lending program and the home building scheme that have been initiated. In pushing forward these schemes, we have been closely monitoring the system's housing and housing finance demand. Products will be tailored to needs of different groups, with a special emphasis on the needs of low-income people. The National Real Estate Information Center will be introduced and implemented in the near future while the development of securitization is currently ongoing.

Ladies and Gentlemen,

Let me conclude my remarks by reaffirming our aspiration in homeownership of the Thai people and our commitment in developing housing finance system. With all the measure implemented, I envision a robust housing finance market that allow everybody to access affordable mortgages. Available information about housing finance and real estate situation will assist everybody in making their decisions in the housing finance system. As asymmetric information will be minimized, housing bubble can be avoided while risk management at each financial institution will be significantly improved.

In closing, I would like to thank Dr. Sopon Pornchokchai again for giving me the opportunity to share with you the Thai government's aspiration as well as our means to an end. Thank you.

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