Revised draft might encourage land hoarding

Updated: 2011-12-23 09:39

By Wang Qian and Zheng Jinran (China Daily)

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BEIJING - The publication of a revised draft on idle land, released by China's land watchdog on Wednesday, is worrying industry insiders. They feel it might intensify the trend of land hoarding.

This is the first time since 1999 that the Ministry of Land and Resources is considering a revision of the rules. The revised draft, published on the ministry's website, is open to public comment until Jan 15.

According to the 1999 rules, real estate developers were supposed to begin construction on plots of idle land within three months after receiving a government notice, else lose their right to develop the land with no compensation from the government.

Generally, a notice would be served if the land was left idle for two years after a developer took possession of it.

The new draft lists four conditions allowing an extension of the deadline to start construction for property developers.

It says the deadline for beginning construction might be extended by one more year if the land is left idle beyond two years because of local governments' improper administration in planning or demolition, judicial seizure, military control or protection of historical relics. The extension would have to be negotiated between the government and developer.

However, if the ministry and the developer are not able to reach a disposal agreement after a year, the ministry can rescind the usage rights without compensation, transfer the usage rights to a new user, or charge a fee of up to 20 percent of the price paid for the land.

Wang Wanmao, vice-chairman of the China Land Science Society, told China Daily on Thursday, that developers could use the policy to extend the construction deadline and indulge in land hoarding.

According to the statistics from the ministry, more than 60 percent of land is made to lie idle because of local governments' improper administration in planning or demolition of existing structures.

Within the first eight months in 2010, a total of 11,000 hectares of land, equal to the area covered by 13,750 football fields, was left undeveloped across China, the statistics showed.

Hoarding of land often leads to huge profits. As a former property developer surnamed Shang told China Daily, he once made a profit of about 20 million yuan ($3.1 million) from a land he hoarded for 10 years, selling it for three times its price in the 1990s.

Chen Baocun, deputy secretary-general of the National Real Estate Manager Alliance, said a small group of real estate developers were into hoarding of land, but if the draft became effective, the negative influence will extend to the housing market. Land hoarding, he felt, might become a trend, thereby decreasing the supply of housing units.

He added that increasing the supply of land might be a better solution to the problem, rather than subjecting errant developers to a drastic punishment.

The Chinese government has tried to crack down on land hoarding by real estate developers in recent years as part of a broader campaign to address escalating housing prices.

"If all idle land is placed under construction to increase house supply, the country's feverish housing market will cool down," said Yan Jinming, a professor of land management at Renmin University of China in Beijing.

China Daily

(China Daily 12/23/2011 page5)