State land rents based on ROA

The Treasury Department has set a new rental fee calculation of a range of 3-5% for return on assets (ROA) for its land used for commercial purposes, and 1% ROA for residential property and farmland.

More than 160,000 tenants across the country are liable to have higher rental costs after the new computation method for commercial use is applied this year, but the rental rate is still below that charged by the private sector of 6-8% of ROA, said Chakkrit Parapuntakul, director-general of the department.

Prior to the new rule, the department had no standard rental fee calculation method and the rate was different for each contract.

Mr Chakkrit said in the initial stages the department is charging those who rent state land for commercial use at 3% of ROA.

The new method already applies to new tenants this year, but the department has given existing tenants one year before it is applied.

The department will also apply a step-up rental fee scheme to existing tenants to alleviate their burden if their new rent surges significantly, he said.

The new calculation method should compel tenants to raise their land utilisation efficiency, said Mr Chakkrit.

For example, tenants who rent state land on Silom or Phaya Thai roads for residential use must now pay 1% of ROA, an increase from 2,000 baht per month, so they might raise the land utilisation efficiency by switching the property to commercial use and paying rent of 3% of ROA.

He recently said the new calculation is expected to boost this year’s Treasury Department revenue to 8 billion baht from 7 billion forecast previously. The method has already been applied to the department’s land lease agreements with Bangchak Petroleum, Thai Oil and Airports of Thailand (AoT).

For the AoT, the Treasury Department reached an agreement to apply two lease rates in a new contract for Suvarnabhumi airport. The rates are based on revenue sharing at 5% for aviation areas and ROA for non-aviation commercial space.