Builder wary of new policy
Shanghai Real Estate says measures muddle roles of state and developers
The government's latest package of austerity measures for the property market will get the government's and private sector's roles confused, according to a developer.
'The package of nationwide policies aims to build harmony in society by improving home ownership for low-income groups. The motivation is good,' said Shi Jian, the chairman of Shanghai Real Estate. 'However, the policies compel developers to build smaller flats for low-income earners and, in some ways, do not favour the developers.'
Mr Shi said the government used the new measures to shift part of its responsibilities - providing homes to low-income groups - to developers.
'It makes developers' role [which is supposed to maximise profits for shareholders] unclear,' he said.
'Developers build and design large flats based on market demand. Now the government asks them to follow the plan to build smaller flats. If the products are not welcomed by buyers, who will underwrite the units? Will the government underwrite them?
'It will put us in a difficult situation.'
Mr Shi said Shanghai Real Estate had made its views known to the mainland's property developers' association, which would pass on the industry's view to the central government.
He believed the government would make adjustments in implementing the measures after listening to the industry.
He suggested that the government expand the development of public rental housing and accelerate the establishment of a Hong Kong-style home ownership scheme to provide subsidies to low-income flat buyers.
Last month, the central government announced a package of measures to cool rising property prices. The significant aspects call for at least 70 per cent of the total area set aside for residential development to be dedicated to flats no bigger than 90 square metres and call for a business tax of 5.5 per cent on the total selling price of properties resold within five years of the purchase date.
Mortgage loans are limited to a maximum of 70 per cent of the purchase price (except for units of 90 square metres or less).
Mr Shi said Shanghai Real Estate had had its projects approved ahead of the measures' announcement and these would be sufficient for development over the next three years.
He said the firm would consider diversifying investments outside Shanghai. It has a land bank of 1.4 million square metres gross floor area in the city, which it estimates will be sufficient for its development needs in the next four to five years.
'We have talked to Moody's and Standard & Poor's, which have raised concern about our high concentration of investment in the Shanghai property market. Therefore, we are looking for investment opportunities in second-tier cities close to Shanghai such as Jiaqing and Ningbo.'
Shanghai Real Estate's profit surged 234 per cent to $301 million last year from $90 million in the previous year.
