The Ministry of Construction reports China has resolved 9,029 cases of fraud, illegal land seizures and other violations in the real estate industry since last March.

In some cases, developers had seized land illegally or held sites idle for two years or longer.

China’s State Council, the cabinet, recently issued a circular calling for higher land use efficiency.

The circular said, ‘If land approved for development remains unused for more than two years, it should be recovered by the government according to laws and regulations. If the land remains idle for more than one year and less than two years, land developers should pay a 20 percent fee.’

The ministry said some developers had built residences without permits, pre-sold substandard apartments or misled buyers with false advertising.

Some local administrative officials were involved, mostly abusing their licensing or supervisory power in return for illegal gains.

The ministry said, ‘Some didn’t impose penalties required by laws and regulations, while some illegally issued planning, construction, pre-sale or demolition permits to developers. Some cases involved power-for-money deals between property companies and officials from supervision departments.’

The ministry started a crackdown on the real estate sector last March, after it declared that the industry had become a hotbed of corruption.
Source: Window of China

A State Administration Taxation official has dismissed market rumors that the property tax levy is likely to start within the year.

Basically what he said was the it could not happen in a hurry because the departments concerned were not connected and thus unable to administer the tax.

The official said previous reports that the central government would start to collect the tax before June were wrong

The Guangzhou Daily quoted this unnamed official as saying: ‘The levy will not start in the next two years. The property tax involves too many issues to be dealt with easily.’

At the end of last year Liu He, vice-minister of the Office of the Central Leading Group of Financial and Economic Affairs, suggested the levy would start in pilot areas in 2008. From this started the concern over an immediate implementation of the property tax.

It is known that preparations for the introduction of the property tax started early in 2003. It was seen as part of a systematic tax adjustment aimed at unifying the current housing property tax, urban real estate tax, land value-added tax and land-leasing fees under a single name.

If the land-leasing fees, which constitute a key component of property prices now, become part of the property tax, which would be spread more evenly to 40 to 70 years after the purchase, housing prices will be reduced significantly.

However, the official explained, basically what it was about was inter-departmental lack of connectedness.

He said, ‘At present the tax, financial and real estate departments are not completely connected, we cannot even effectively communicate our information through the network, let alone levy a property tax that involves all the three systems.’
Source: Shanghai Daily

This long but readable report on Urban Real Estate Law by Paul D. McKenzie can be accessed by clicking on Source.

Article 42 of the Property Rights Law allows for the expropriation of private property in the public interest in accordance with the authorization, and following procedures provided by law.

The Regulations for Administration of the Removal of Urban Houses, enacted by the State Council in 2001, previously governed expropriation, but these were made unenforceable upon implementation of the Property Rights Law. Accordingly, there are currently no laws detailing what authority is required and what procedures are to be followed for the expropriation of private property.

To remedy this, on August 30, 2007, the Standing Committee of the National People’s Congress amended the Law on the Administration of Urban Real Estate in order to authorize the State Council to promulgate detailed rules concerning expropriations.

The amendment also states that the owners of expropriated real estate are entitled to compensation. Where the expropriated real estate is a residence, the amendment guarantees the ‘residential conditions’ of the displaced owners following resettlement.

These rules need to be implemented which makes prediction difficult but one likely change over existing rules is an increase in relocation costs that will need to be borne by developers.

There is much, much more in this coverage and anyone involved in developing or real estate should read it.
Source: Mondaq

China’s property sector took off in 1998, when Chinese citizens were granted the right to buy their own homes. Since then, according to an online market overview published by Property Frontiers, China’s property sector has seen an average rate of growth of 22% a year, fueled substantially by a large amount of investments flowing into the market,

The phenomenon has sparked fears that a property bubble is being created in China.

Consequently, the Chinese government placed restrictions on foreign investment in July 2006 as part of an overall effort to control the massive appreciation seen in recent years.

Michelle Gon, senior partner at the international law firm Baker & McKenzie, said that in order for foreign investors to acquire non self-use property in China, they must incorporate and capitalize an onshore entity in China, or foreign-invested real estate enterprise (FIREE), to acquire and hold investment properties.

Additional restrictions have been placed on specific segments of the real estate industry, such as development of whole tracts of land, construction and operation of luxury hotels, resorts, office-buildings and exhibition centers and second level-real estate market transactions, Gon said. Such efforts are not prohibited by law, but investors must obtain approval from authorities on a case-by-case basis.

The debt to equity ratio for FIREEs with a total investment of $10 million has also been reduced to 50/50.
Foreign individuals who work or study in China for more than one year can purchase self-use property, or property for their own use or residence.
Foreign entities with branches or representative offices in China in operation for more than one year may also purchase self-use property.

Although restrictions have made it more difficult for foreign non-resident private individuals to invest in China’s real estate market, large institutional investors are working within the rules of the system to provide a steady flow of foreign capital to China’s property sector.

Until China’s real estate market sufficiently cools down, it is unlikely that the Chinese government will lift restrictions on foreign property investment.
Source: New Investor

Reportlinker.com has announced a new market research report: China Real Estate Industry Report, 2007-2008.

The report is extensive and thorough. The summary covers only the high points:

Between January and August of 2007, China real estate development investment reached RMB 1.42 trillion, up 29%.
Its growth rate was up 5 percentage points year on year, 2.3 percentage points higher than that of urban investment at the same period.
The real estate investment occupied 20.4% of the urban investment, up 0.4 percentage points.
The completed investment in residential buildings in 2007 is up 30.9%.
The structure of housing supply begins to improve, but the proportion of the apartments below 90 square meters is still relatively low.
Statistics from 40 key cities show that the supply of the common commercial residential apartments below 90 square meters is rising month by month among newly-approved and newly-built residential buildings in those cities.
The average floor area of each approved pre-sale commercial residential apartment dropped from 122.3 square meters in July of 2007 to 106.95 square meters between January and August of 2007, but the average floor area per commercial residential apartment available in the market up to the end of each month is still around 114.03 square meters which is considerably above the 90 square meters which defines affordable housing.
The national completed area of commercial buildings was 208,346,500 square meters in August of 2007, up 10.1% year on year.

The summary shows the report comes to the conclusion that with stricter regulation and frequent interest rate increases the strong will become stronger. So the key real estate companies will see high growth of market performance as well as market share.

Even the summary, of which this is but a small part, is remarkably thorough and well worth reading in full.
Source: Business Wire