Key takeaways
- Land held for future development is not free. The costs include interest, land and building tax, upkeep, and the return that the capital should earn.
- In the example, THB 100m of land held for 5 years has a cash cost of THB 24.33m. Including a 15% a year return on equity, the total cost is THB 54.33m.
- Set the price you must be able to sell at in future before deciding to keep holding, rather than just looking at whether the market price has risen.
You bought land 5 years ago, intending to develop it when the timing is right. Whenever someone asks, the answer is that the land price has gone up. But no one has calculated how far the price must rise for holding to be worthwhile. Vacant land generates no income to pay the interest, so every baht of the burden is paid from the company's other funds.
What carrying cost includes
| Cost group | Example items | Characteristics |
|---|---|---|
| Borrowing cost | Interest, facility fees and collateral valuation fees | Cash |
| Land and building tax | Calculated on an appraised-value base according to the type of land use | Cash, paid annually |
| Upkeep | Fencing, security guards, weed clearing, land surveys and legal obligations | Cash |
| Opportunity Cost | The return shareholders require on the capital tied up in the land | Does not leave the bank account, but is a real cost of the decision |
| Risks not shown in the financial statements | Zoning changes, access, encroachment and falling market prices | Should be modelled as a scenario |
Land and building tax in this context
Under the Land and Building Tax Act 2019 and the rates set by the Royal Decree of 2021, vacant or abandoned land, or land not used appropriately, is taxed in value bands as follows. Data checked in Nov 2026.
| Tax base value | Rate per year |
|---|---|
| Up to THB 50m | 0.30% |
| Portion above THB 50m up to THB 200m | 0.40% |
| Portion above THB 200m up to THB 1,000m | 0.50% |
| Portion above THB 1,000m up to THB 5,000m | 0.60% |
| Portion above THB 5,000m | 0.70% |
If the land is left unused for more than 3 consecutive years, the rate increases by a further 0.30% every 3 years, up to a maximum of 3% a year in total. To classify land as agricultural by planting crops, you must actually farm it, with the types and minimum number of plants prescribed in the announcement. There are also reports that local authorities will inspect sites more strictly, so this benefit should not be put into the model without confirmation.
Developer's land The Royal Decree on tax reduction in 2020 granted tax reductions for land in housing estate projects and, in some cases, condominium projects, within a set period. Measures of this kind are tied to conditions and time windows. Ask the local administrative organisation which category your plot falls into and whether it qualifies for a reduction in the current tax year.
Example: holding land for 5 years
Hypothetical example Land bought for THB 100m, financed with a THB 60m loan at 7% interest, interest-only. Equity of THB 40m requires a 15% a year return. The tax base is a constant THB 80m and upkeep is THB 0.3m a year. The land is classed as vacant for all 5 years, and the 0.30% increase applies from year 4. Unit: THB million.
| Item | Years 1–3, per year | Years 4–5, per year | Total over 5 years |
|---|---|---|---|
| Interest 60 × 7% | 4.20 | 4.20 | 21.00 |
| Land tax | 0.27 | 0.51 | 1.83 |
| Upkeep | 0.30 | 0.30 | 1.50 |
| Cash cost | 4.77 | 5.01 | 24.33 |
| Return on equity 40 × 15% | 6.00 | 6.00 | 30.00 |
| Total economic cost | 10.77 | 11.01 | 54.33 |
Tax in years 1–3: 50 × 0.30% + 30 × 0.40% = 0.27 Years 4–5: 50 × 0.60% + 30 × 0.70% = 0.51
Price needed in 5 years = 100 + 24.33 = THB 124.33m to recover the cash cost, or 100 + 54.33 = THB 154.33m when the return on equity is included.
This equates to annual land price growth of 4.45% and 9.07% respectively, before brokerage fees, tax on sale and the effect of compounding interest.
Note that land tax is a small share of the cash cost in this example. What makes the land expensive is the cost of money. If the owner uses only their own funds, the interest disappears, but the cost moves into the return that the capital should earn. It has not truly gone away. ⟦50⟩ Accounting effects to know
Accounting effects to be aware of
- Land held for development and sale is inventory under TAS 2, stated at the lower of cost and net realisable value, so it must be tested when market prices fall.
- Interest is not always a land cost. Capitalising it under TAS 23 requires activities to prepare the asset. If the land is simply held with no development activity, the interest is usually an expense.
- If the purpose of holding changes, review the accounting classification and the tax effects based on the facts.
Options when the numbers do not work
| Option | Suitable when | Trade-off |
|---|---|---|
| Develop a small phase | Location is ready and feasibility passes | Requires capital and a team |
| JV with a developer | You have land but lack funds or a team | Returns and control are shared |
| Long-term lease | You do not want to sell ownership | Limits future options |
| Sell part or all of the plot | There is no clear development plan, or debt needs to be reduced | Lose the chance of a higher future price |
| Genuine temporary use | Long-term holding, with activities that generate income or have a business rationale | Check the lease, the tax effects and how to vacate when you come to develop |
Next steps
- Register every plot of land with its cost, secured debt, land-use type and holding start date
- Calculate the cash cost and total annual cost for each plot
- Calculate the price you must be able to sell at at the point of decision
- Check the latest tax assessment notice and ask which rate applies to the actual plot
- Set a decision deadline for each plot: develop, joint venture, lease or sell
- Test NRV every period in which there are signs of falling market prices