The Shanghai government is building compact housing downtown to offer to residents being relocated as part of the city's three-year project to demolish shabby houses, said construction and real estate officials yesterday.

This means residents relocated out of the old housing will in future have a better chance to remain living downtown, instead of taking a replacement apartment in the suburbs.

Many residents have proved unwilling to be relocated out of their former areas and ask for cash compensation instead of a new home, officials said.

The price of downtown real estate has shot up since this round of the renovation project started three years ago.

So residents in the targeted quarters keep asking for more compensation, said officials with the city's construction authority.

Lengthy negotiations and growing relocation costs have seriously impeded the pace of the housing renovation project, officials said. There is now a bottleneck of relocation cases to be managed, and some negotiations are in deadlock.

The government decided in early 2006 it should demolish 10 million square meters of old downtown residential quarters.

Most of the residents there were living in dilapidated units and had to share toilets and kitchens.

By the end of last year, only about 20 percent of the targeted quarters had been demolished because of stalled relocation negotiations.

Private real estate developers are also dragging their feet, claiming increasing compensation costs have squeezed their expected profits, officials said.

Urban planners in the nine downtown districts are looking at available land resources to build compact residential units to offer to residents who are being relocated, in the hope that this will speed things up.

Officials yesterday said the first batch of these units, in downtown Yangpu, Zhabei, Xuhui and Putuo districts, are under construction.

The government also said it will boost its compensation fund to expedite negotiations. Shanghai Real Estate Group, a state-owned developer, will inject 20 billion yuan (US$2.92 billion).

Shanghai's efforts to dismantle shabby housing started in the 1990s. So far, 1.2 million households have been relocated.

(Shanghai?Daily?March 19, 2009)