The Shanghai residential market is set to change as the mainland government prepares to launch new regulations to unify the granting system of land for foreign and domestic housing.
Property consultant DTZ Debenham Tie Leung Shanghai said the city planned to replace the present segregated foreign and domestic land-use system to stimulate overseas investment interest.
Under the present system, foreign and domestic investors face a different real estate environment. Foreign investors are not encouraged to set up wholly foreign-owned enterprises for developments in Shanghai and the participation of a local partner is needed.
In addition, a 30 per cent land-price premium is imposed on land granted for foreign use, which substantially increases development costs compared with domestic developers.
These two obstacles, along with stagnant market conditions resulting from the Asian financial crisis, had discouraged foreign real estate investment in recent years, the consultant said.
The lack of foreign investment has led the Shanghai government to reconsider the system.