Thailand’s Ashton Asoke Condo ruling could affect financing

Construction News
Ashton Asoke condo on Asok Road. A court order to revoke the condo’s construction permit may have a knock-on effect for other developers seeking financing. (Photo: Wichan Charoenkiatpakul)

Thailand’s Ashton Asoke Condo ruling could affect financing

The Ashton Asoke case, in which the condo was ordered to have its construction permit revoked, will have an impact on property developers who depend on issuing debt instruments and securing loans for funding, as lenders are becoming more hesitant, according to developers.

Anuphong Assavabhokhin, chief executive of SET-listed developer AP Thailand, said the aftermath of this case has generated a significant impact as financial institutions become more cautious about extending credit to real estate companies.

“In addition to the challenge of a rising mortgage loan rejection rate, obtaining loans will be not easy,” he said.

“The issuance of debt instruments will also become more difficult.”

The impact could be detrimental to residential developers, especially medium-sized companies that issued debt instruments and are nearing the point of rolling over those debts, said Mr Anuphong.

“If these developers are unable to execute these roll-overs, could this potentially result in issues akin to the 1997 crisis?” he asked.

Many companies are opting for debt instruments instead of bank loans. If they cannot obtain bank loans and fail to roll over these debt instruments, it could lead to a significant crisis down the line, said Mr Anuphong.

On July 27, the Supreme Administrative Court issued an order to revoke the receipt of notification of intention for construction or modification of the building granted to the already finished and transferred Ashton Asoke.

The 50-storey project worth 6.4 billion baht is one of the joint venture projects between SET-listed developer Ananda Development and Japanese developer Mitsui Fudosan.

According to the court’s ruling, the condo’s land plot is unable to construct an extra-large building because it does not have at least one side with a minimum of 12 metres length and adjacent to a public road with a minimum width of 18 m, in accordance with the Building Control Act.

In addition to Ashton Asoke’s developers and buyers, other developers such as Noble Development Plc were affected by the court’s ruling, as it was questioned by customers about whether its buildings bear any resemblance to the Ashton Asoke case.

Thongchai Busrapan, co-chief executive of Noble Development, said the company used lands according to their original physical conditions to submit for approval an environmental impact assessment report and a construction permit without any change, modification or relocation.

“The Ashton Asoke case prompted us to provide explanations not only to the media, customers and financial institutions, but also to credit rating agency Tris Rating,” he said.

Mr Thongchai said this case has affected the entire Thai property sector because the project is a collaboration between a Thai developer and a foreign investor.