Listed developers in limbo after Beijing, Shanghai crack down on ‘commercial flats’
The problem could deter developers from acquiring commercial land in the future, analysts warn
Several major listed developers are saddled with large stockpiles of residential property they can’t shift after the governments of Beijing and Shanghai cracked down on sales of apartments in buildings originally intended for commercial use.
Many homebuilders have found themselves locked in legal disputes with buyers of such flats – referred to variously as commercial apartments, altered-use properties or converted residences – which had increased in popularity amid a dearth of residential land and heightened market cooling measures.
Analysts say that although in most cases the problem only affects a small proportion of a developer’s portfolio, it serves to highlight the regulatory risk that at times threatens to undermine the mainland’s real estate sector.
Many Shanghai developers have been in limbo since the start of the year, when the local government banned sales of residential units built on land meant for retail and office space. Some districts went a step further in February, giving developers just 15 days to tear down partitions and remove plumbing and gas pipes in the apartments to restore the office structure.
On March 26, Beijing developers were dealt a blow when the city’s government banned the sale of the converted flats to individuals. Until then, they had accounted for 60 per cent of the city’s new home sales.