Developer Reputability

Phuket has a number of competent property developers, both local and foreign, with strong market experience. However, no developer is infallible. Even large corporations can run into trouble if there are sudden changes in the property market, and buyers often bear the personal consequences if their chosen developer faces difficulties.

Phuket developers range from small private firms to large companies listed on the Thai stock exchange or on overseas markets. While it’s relatively easy to review the balance sheet of a listed company, a solid financial position in their home country does not guarantee they won’t abandon an overseas project if it becomes unprofitable.

Assessing the finances of private companies is more difficult, but that doesn’t mean they are automatically a poor choice. A well-run private developer with audited accounts and transparent operations can still be a safe investment.

Size and reputation can influence stability. Many established Thai developers sell out projects quickly based on reputation alone, without having to negotiate on price. This can be relevant for foreign buyers, especially since Thai law requires that at least 51% of any condominium project is owned by Thai nationals. Strong local demand from reputable developers often translates into stability and confidence for foreign investors.

From a Phuket property risks perspective, established companies generally present fewer dangers than a “one man band” launching their first project. However, even respected developers can encounter setbacks, whether from poor site selection, unforeseen regulatory issues, overextended debt, or internal mismanagement.

Smaller developers may also present what’s known as “Key Man” risk. If the owner or senior partner dies unexpectedly, does the company have insurance or contingency plans in place? In most cases, the answer is no. Buyers should ask about these provisions when dealing with a private company.

Ultimately, a developer’s past projects and reputation should not be the sole criteria for making a decision. Conducting thorough due diligence on any developer will greatly reduce the risk of problems. And if your investigation still leaves you uncertain, remember the old investment saying: “If in doubt, stay out.”

EIA Approval on Phuket’s New Projects

The Environmental Impact Assessment (EIA) has been a requirement in Thailand since 1981. It is designed to evaluate not only a project’s potential environmental impact but also its overall benefits to the community and economy. An EIA outlines the measures a developer must take to ensure resources are used efficiently, that the project is beneficial to Phuket, and that it aligns with the country’s long-term development goals.

Developers often highlight EIA approval when marketing new projects, particularly off-plan developments where the land is still untouched. While EIA approval is important, it is only the start of the process, and it can be revoked if the project fails to comply with regulations.

EIA assessments cover a wide range of factors: air quality, soil and groundwater contamination, wastewater treatment, noise levels, impact on local ecosystems, effects on neighbours, and even whether the design is visually appropriate. Most significant new developments in Phuket require EIA approval, but receiving it is not a guarantee of completion. The green light is conditional on compliance throughout construction, and changing circumstance, such as extreme weather, can alter the assessment.

For example, a hillside condominium could run into compliance problems if heavy rains cause soil runoff. If design modifications can correct the issue, the project might proceed. If not, it could be halted indefinitely.

A major regulatory change in December 2018 caught some developers off guard: construction on gradients greater than 35% was banned (except for single houses no higher than six metres). Projects without an approved building permit were stopped, leaving early buyers, many of whom had purchased off-plan, at risk of financial loss.

If a project is cancelled, buyers may face long delays in recovering their investment. Even if the developer seeks compensation from the government, investors may still spend years waiting for a refund instead of moving into a completed home.

Dirty Land: The Worst of Phuket Property Risks

While a lack of EIA approval doesn’t always mean a project is doomed, building on “Dirty Land” is an entirely different matter, and it is one of the most serious Phuket property risks a buyer can face.

“Dirty Land” refers to land that is illegally held, often national forest or government-owned, sometimes tied to corruption cases dating back decades. Unfortunately, some developers, knowingly or unknowingly, have built projects on such land.

There is no statute of limitations on reclaiming government land. Most legal experts agree it is only a matter of time before all encroached land is taken back by the state. When that happens, the authorities, whether the Forestry Department or the Royal Navy, will demolish illegal buildings, restore the land, and replant trees.

For anyone who has bought in such a project, the consequences are devastating: there is a very real chance of losing 100% of the investment.

Buying Off-Plan Condos and Villas in Phuket

For any would-be property owner, one of the riskiest ways to buy is to purchase off-plan. It’s a common practice in Phuket, and in a strong market, a development can sell out before the foundations are even laid. Off-plan purchases come with both advantages and disadvantages, and it’s important to understand both before committing.

The benefits are easy to see. Buyers can often secure a property at a reduced introductory price, motivated by discounts and limited availability. Wait too long, and the most desirable units may already be gone, or those that remain will be more expensive.

Off-plan developments often appeal to investors seeking capital appreciation rather than an immediate residence. Buyers typically have the chance to purchase one or more units before construction starts. While completion may be months or years away, the pre-construction pricing in Phuket can be very attractive. Early buyers also get the prime selection, top floors, sea views, and pool-facing units. Those who miss out may find resale more difficult, especially when competing developments offer better locations or views.

However, there are significant Phuket property risks to consider. An off-plan project may never be completed due to developer bankruptcy, loss of EIA approval, or other unforeseen issues. Even with due diligence, unexpected events can derail construction. Some developers also inflate prices to cover sales commissions, marketing expenses, guaranteed returns, or additional profit. In these cases, it can take years for natural price growth to bring the property back to its purchase value.

Despite these concerns, the appeal of early-bird discounts keeps the off-plan market strong, both for residential buyers and investors. The key is thorough due diligence to ensure the project is financially and legally sound.

If you would like to read more on this subject, you may also like to read our articles here:

The Benefits of Buying a Phuket Condominium Off Plan

The Risks of Buying a Phuket Condominium Off Plan

The Perception of Risk

Risk tolerance varies greatly from buyer to buyer. A multi-millionaire purchasing a Phuket condominium may face no serious emotional or financial consequences if the deal fails, the loss might amount to a day’s worth of investment interest. In contrast, a retired couple investing their life savings in a single property could be financially devastated if something goes wrong.

Investor motivations differ as well. With years of low interest rates and recent inflation reducing the real value of idle savings, many investors seek to diversify into higher-yield assets. Buyers from regions such as China and Hong Kong may also wish to move funds abroad and hold assets in different currencies.

While risk can never be eliminated entirely, it can be managed, or greatly reduced, by seeking the right professional advice and working with reputable lawyers, developers, and agents.

Placing a Reservation Deposit on a Phuket Property

Negative headlines occasionally surface about buyers, often holidaymakers, who place a deposit on a Phuket property, only to change their minds later. Some act on impulse and experience buyer’s remorse; others discover they were misled about the purchase.

A deposit should never be paid without first obtaining legal advice. It’s essential that any reservation deposit be refundable, and a good lawyer will ensure this is written clearly into the agreement. The seller or agent should have no objection to allowing time for a lawyer to review the terms.

The lawyer’s role is to include protective clauses that allow the buyer to withdraw if due diligence reveals serious issues. These clauses must be worded in a way that legally binds the developer or seller to return the deposit.

Ideally, the property’s title deed should be checked before any deposit is paid. If that’s not possible, confirming a clear title must be a condition for proceeding to the next stage of the sale. Lawyers can also advise on other necessary conditions, specific to the buyer’s circumstances or the property in question.

In Phuket, there will always be new developments to consider. Acting on urgency is rarely a recipe for a successful investment. If an impulse decision is made, protective clauses in the reservation agreement are the best safeguard against unnecessary financial loss.