Shanghai government yesterday leveled the playing field for residential real estate developers by launching a public bidding system that allows overseas and domestic companies to compete for the same projects and on the same financial footing.
Usage rights for five parcels will be set out for bids tomorrow - the first time mainland and overseas firms will receive equal treatment in the costs they pay for leasing government-owned land.
While industry analysts aren't predicting any major changes in the prices consumers pay for homes and apartments, they do agree the policy change will increase competitive pressures on domestic developers, who will no longer enjoy a cost advantage.
"The move aims to create an open and fair market for developers from home and abroad, and it compels the government to improve its efficiency and overall control of the land supply," said Cai Yutian, director of the Shanghai Housing, Land and Resources Administrative Bureau.
In the past, city government negotiated land-use rights with individual developers, charging one price for domestic enterprises and a higher fee for overseas firms.
"We are finally standing at a same scratch line with mainland developers," said Alex L.F. Pun, assistant general manager of Hong Kong-based New World China Land Ltd.
Though it's hard to calculate the previous price differential because projects vary in size and scope, Pun said overseas ventures usually had to pay twice as much as their mainland counterparts.
Starting tomorrow, the public bid requirement will go into effect for all land leased for apartment houses, villas, retail stores and travel, entertainment, finance and service industry facilities. Older residential areas that have been approved for reconstruction are excluded.
The new policy won't be immediately adopted for office projects, but such a change is under consideration.
Among the initial plot offerings, four are for residential projects: a 70,868-square-meter lot on Minghua Road in Songjiang District, 32,025 square meters on Gaoxiong Road in Luwan District, 7,874 square meters on Pingliang Road in Yangpu District, and 4,036 square meters at Zhongshan Bei Yi Road in Hongkou District. A 34,153-square-meter parcel on Xianxia Road W. in Changning District will be available for commercial development.
District governments are expected to announce the bid results in late September or early October.
Homebuyers from China and abroad will also enjoy equal treatment in transaction fees under the new regulation. Starting tomorrow, buyers and sellers are required to pay 250 yuan (US$30) each in transaction fees for an apartment unit worth more than 300,000 yuan, while the fee for a unit worth 300,000 yuan or below will be 125 yuan each.
People who buy homes in projects reserved for overseas residents currently pay transaction fees equivalent to 0.5 percent of the selling price. For domestic projects, the fee is only 0.08 percent for buyers and sellers.
Though land-lease costs may increase through future bids and auctions, industry officials don't expect an immediate surge in prices from the new regulation.
"With balanced supply and demand, prices won't increase dramatically," said Cai. "In the end, the market will decide."
Now that all residential developers are competing on the same footing, mainland developers are under new pressure, say industry officials.
"Domestic developers do have advantages and don't necessarily lag overseas ventures in cost control and design," said Wang Peng, chairman of Shanghai Star (Group) Co. Ltd., one of China's largest developers. "What con-cerns me is that overseas developers usually have stronger capital support."
(Eastday 07/31/2001)
