Developers face penalties over Guangzhou sites

PUBLISHED : Wednesday, 12 August, 2009, 12:00am
UPDATED : Wednesday, 12 August, 2009, 12:00am

Guangzhou R&F Properties, Poly Real Estate Group and Gemdale Group are facing penalties from the Guangzhou government for not completing the purchase of four development sites.

Huang Wenbo, the undersecretary of the Bureau of Land Resources and Housing Management of Guangzhou Municipality, told mainland media that the bureau had investigated 27 sites sold at the market peak in 2007 and found some remained undeveloped.

Four sites acquired by R&F, Poly, Gemdale as well as another by small local developer China Horoy in 2007 were still untouched and although the initial deposit had been paid, the balance of the land premium was still outstanding.

The sites were sold for 8.07 billion yuan (HK$9.15 billion) in 2007.

The deposit and sites would be forfeited if the developers gave up the site. The government would also claim for the decrease in value after any resale of the sites.

If the developer is willing to develop the sites, the government would allow it to postpone the payment for up to two years.

The sites included R&F's residential site in Baiyan district, Poly's two sites in Jinshazhou area and Gemdale's site in Panyu district.

Huang Tao, a project manager at Centaline's Guangzhou office, said the government had the right to impose penalties of about 10 per cent of the reserve prices based on the land sale agreement.

'I don't think developers would resume the development plan as the land prices have dropped significantly in recent years,' he said. 'Gemdale bought the site for about 6,000 yuan per square metre two years ago. However, the site is worth 4,000 yuan per square metre only, based on the latest transactions.'

Lee Wee Liat, a senior analyst at Nomura International, said: 'If the government makes the developers forfeit the sites, it is a signal to developers that they have to be more cautious in obtaining land.

'If you dare to purchase the site at a record high price, you have to make sure that you are able to develop it within the timeframe.'