In light of the recent Ashton Asoke event that left the property development community in disarray, financial institutions are holding their cards closer to their chests when considering lending loans or releasing debt instruments to players in the real estate sector. The construction permit withdrawal for Ashton Asoke has made AP Thailand’s chief executive – Anuphong Assavabhokhin – voice concerns on the increasing difficulty to secure bank loans and even predict complications in future debt instrument issuance.
Contextually, Anuphong drew attention to middle-tier residential developers who are on the brink of rolling over the debts from their previously issued debt instruments. As Anuphong points out, “If these developers fail to successfully roll over their debts, does that set us on a path akin to the crisis of 1997?”
Banking on Ashon Asoke’s recent encounter, a large portion of companies that depend heavily on issuing debt instruments as an alternative to loans could find themselves in a state of upheaval. Should they be unable to secure loans or roll over their current debt instruments, the industry might find itself at the threshold of a major crisis, warns Anuphong.
It all atarted on July 27 when the Court of Administrative Justice issued an order to revoke the notification of intentions concerning the construction or modification of the Ashton Asoke building. This 50-storey project, financed to the tune of 6.4 billion baht by a partnership between Ananda Development, a SET-listed developer, and Mitsui Fudosan, a Japanese developer, incurred the court’s ire for non-compliance with the Building Control Act. The court found that the land earmarked for the condo didn’t meet the requirements to host a super-large building, for it didn’t have at least one side with a minimum length of 12 metres adjacent to a public road of at least 18 meters in width.
Subsequent to this verdict, several other developers such as Noble Development Plc found themselves in a pickle of sorts, fielding queries from clients drawing comparisons with the Ashton Asoke case. To set the record straight, Thongchai Busrapan, Co-Chief Executive at Noble Development, mentioned clearly that in applying for construction permits and presenting environmental impact assessment reports, they made no changes, adjustments or relocations to the original physical conditions of the lands they used.
Thongchai’s remarks were along the lines of: “The Ashton Asoke case has compelled us to provide explanations to not just our clients and the media, but also to credit rating agencies like Tris Rating,” thereby signifying the wide-reaching impact of the case. He also emphasized on how the incident had put the Thai property sector under the spotlight, given the fact that a domestic developer was collaborating with an overseas investor on the project, as reported by Bangkok Post.
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