A mismatch between loan terms and project durations has forced developers with substantial condo inventory to grapple with short-term debt obligations, with over 80 billion baht in debentures due for repayment this year, according to Asia Plus Securities (ASPS).
Therdsak Thaveeteeratham, executive vice-president of ASPS, said that while developers' debt-to-equity ratios were not high, many relied heavily on debentures.
They also issued debentures with maturities too short or misaligned with condo construction timelines.
"Developers have become too reliant on debentures," Mr Therdsak said. "If the debenture market weakens and rollovers are not possible, they risk default. When debt matures while condos are completed but many units remain unsold, it creates financial strain."
He warned that developers must avoid repeating mismatches like those seen in the past, as the property sales situation is weaker than before.
New debenture issuances will undergo stricter screening, with potential collateral requests to reduce risk for subscribers.
ASPS reviewed the financial statements of 14 Stock Exchange of Thailand-listed developers, ranging from mid-sized to large, as of the end of 2024.
Total interest-bearing debt amounted to approximately 412 billion baht, with 52% consisting of debentures.
Of this amount, 80 billion baht is due for repayment this year, which will pressure them due to weak demand amid the economic slowdown.
The low-to-middle-end segment is struggling to secure mortgage loans, while the upper-end segment faces high competition.
"Supply is too high, which has extended sales periods from under three years to over four years," Mr Therdsak said. "Developers must assess whether their financial structure is strong enough to hold or manage the supply."
He said 14 listed developers have announced plans to launch new residential projects this year worth a total of 320 billion baht, down from 340 billion baht in 2024, which was lower than the previously announced 430 billion baht.
When combined with ongoing projects worth 845 billion baht carried over from 2024, the total will exceed 1.1 trillion baht. As a result, ongoing projects will increase due to the slowing sales rate, Mr Therdsak noted.
"Sometimes, even though developers are aware that supply is high, everything has already been planned -- from land acquisition to the EIA and marketing plans -- so the projects must proceed," he added.
Mr Therdsak said that 14 listed developers currently have a combined unsold, completed condo inventory worth 120 billion baht, which will generate revenue and cash flow once sold.
However, demand contracted from 2022-2024. In the fourth quarter of 2024, transfers dropped both year-on-year and quarter-on-quarter, despite using pricing strategies, with all developers reporting lower revenue than expected.
"14 developers are targeting combined presales of 300 billion baht in 2025 with 10% growth. However, it remains uncertain whether this target will be met, as it largely depends on the economic environment. We are particularly concerned about the economic situation in the second half of 2025," Mr Therdsak said.
He suggested developers diversify into non-residential development business, as joint ventures do not expand business structures.
With profits from property falling, diversification is necessary due to the volatility of the residential sector.