Housing Finance Subsidy for Low-income Group by the Government: Case Studies of Baan Pracharat Project and Baan Laan Lung Project

Abstract

This research aims to explore the concept and mechanism of housing finance subsidization delivered by the Thai government.  The Baan Pracharat project and Baan Laan Lung project are case studies. Data collection was conducted from relevant document.  The findings found that the subsidized mechanism comprised of 4 elements: government policy, state financial institutions, supporting agencies, and beneficiary groups.  The government subsidizes the housing projects both demand and supply sides.  The low-income group are supported to get housing loans with low-interest rate in 1-5 years, and the term loan is expanded to 40 years maximum.  In addition, the state agencies and private developers are encouraged to provide houses at the price of 1.2-1.5 million bahts through lending incentives and tax deduction, especially for the Baan Laan Lung project. From the research assumption, it was found that both cases can provide affordable houses around 85,000 units, but it is still inadequate for low-income groups.  Nevertheless, the credit risk will be happened when the market-interest rate increase, and the long-term debt can also lead to default in the future.  The results of study will be applied for subsidized housing projects in the government housing plan, and for promoting the contract savings method for borrowers.