• Thu
  • Oct 23, 2014
  • Updated: 9:42pm

Shenzhen utility fees hit shares of developers

PUBLISHED : Thursday, 01 February, 2007, 12:00am
UPDATED : Thursday, 01 February, 2007, 12:00am
 

Players fear new move to cool property sector as city implements 13-year-old tax


Shares of property developers with projects in Shenzhen tumbled yesterday after a decision by the city's government to charge the companies billions of yuan in utility fees by April 1.


The local government's move also raised concern among developers about whether Beijing would introduce more measures to cool the property market.


A shares of China Vanke, the mainland's largest listed developer, fell 9.4 per cent to 15.31 yuan after a 6 per cent drop on Tuesday.


In Hong Kong, China Resources Land slid 5.66 per cent to HK$7.84 and Guangzhou R&F Properties declined 3.7 per cent to HK$15.08.


The Shenzhen municipal bureau of land resources and housing management said it would start collecting utility tax from developers with projects that were completed after November 1, 1994.


The tax, which had not been implemented fully after it was announced 13 years ago, would be 2 per cent of a development's construction cost.


'All developers have to report details of their completed projects ranging from offices, shopping centres and apartments in the city during the past 13 years,' the bureau announced on its website.


The bureau first issued a statement in March last year saying it would start collecting the utility tax.


As of December 31, the bureau had received reports from 103 property firms with 116 completed projects in the city. Total tax to be collected will be 718 million yuan.


The city government would generate an estimated five billion yuan from the tax, the Securities Times reported, citing an analyst at Citic Securities.


The Shenzhen tax statement follows a central government announcement on January 17 that it would start collecting from today a tax of between 30 per cent and 60 per cent on land appreciation from developers.


A Hong Kong developer with completed projects in Shenzhen, who requested not to be identified, said the tax should have been included in the acquisition price when the land was bought from the government.


'So far, we haven't received any notice from the government about the tax. We are also confused by the latest series of tax issues,' he said.


Paul Cheng Wing-por, a financial controller at Coastal Greenland Group, which has completed a residential project in Shenzhen, was also unaware of the tax. The project has been sold out to individual buyers.


'We have paid tax for the supply of electricity and other related facilities. I did not hear about a utility tax,' he said.


Despite the uncertainty over China's regulatory measures, medium-sized developer Chinese Estates Holdings has made its third land acquisition in Chengdu, Sichuan province, for 1.07 billion yuan.


The 37,557 square metre site at Tidu Road, Qingyang district, can provide a maximum gross floor area of 300,456 square metres and will be developed into a complex of offices, shopping arcades, hotels and flats.


Chinese Estates in November paid 732 million yuan for two plots of land for residential-commercial development in Chengdu.


'Chengdu has attracted many international enterprises to set up offices,' chairman Joseph Lau Luen-hung said. 'That drives demand for high-quality office towers and international-standard hotels, which are lacking in Chengdu.'


The developer owns the Hilton Hotel in Beijing and the Evergo Tower complex in Shanghai.


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