A new banking regulation may force land developers to finish
projects and sell vacant holdings by keeping track of the funds
they raise from pre-sales, say sources with the Ministry of
Construction.
The developers could be required to open special bank accounts
were funds from all pre-sales must be deposited and then only be
used to finish the project.
Many Chinese realtors sell units in their unfinished buildings
but instead of using the funds to complete construction they plough
them into new projects. This has caused some developers to suffer
serious cash flow problems forcing them to abandon unfinished
buildings and leaving purchasers with nothing to show for their
investment.
The new measure will also allow authorities to track the sale of
apartments, ensuring that all of them have been put on the market.
Some developers have been accused of hoarding empty units in order
to tighten supply and force prices up.
Developers are currently not allowed to pre-sell units in new
buildings until the roof is on. The authorities know that a large
number of realtors ignore the rule and presell under the table.
"Currently it's hard to track and enforcement costs are high,"
bank sources said. "The new measure is likely to be more effective
since authorities can monitor or even direct where the presale
funds go."
A senior official with the Ministry of Construction said on
condition of anonymity the measure may be tested in Shenzhen this
year.
The National Bureau of Statistics reports that the vacancy rate
in the commercial property sector surged 13.1 percent year on year
to reach 121.69 million square meters of floor space during the
first eight months of 2006.
The vacancy rate for residential property increased by 11
percent in the same period to reach 66.44 million square meters, it
said.
The bureau's website does not provide the actual vacancy rate
for either type of property.
Housing prices in 70 major cities in China rose 5.5 percent on
average from 2005, official data shows.
(Xinhua News Agency March 28, 2007)