SHANGHAI'S fledgling mortgage market will grow 30 per cent each year, with demand for housing in the city continuing to soar, the People's Construction Bank of China says. Zhang Wenzhong, the director of the real-estate mortgage department of the bank's Shanghai branch, said that as more people moved out of old and run-down flats in the old districts to make way for redevelopment, their desire to buy their own flats rose. 'The demand is increasing every day,' he said. 'Just last year we lent about 200 million yuan [about HK$186 million] to flat-buyers.' Mr Zhang said the bank had set aside one billion yuan for loans to flat-buyers and developers this year, but this would be raised to about 1.8 billion yuan next year. Although 95 per cent of the amount was given to developers and 5 per cent to flat-buyers, the bank was planning to give more weight to the home-mortgage market. This was in line with Beijing's housing reforms, which promoted home ownership and discouraged loans to developers, he said. Mr Zhang said he expected that it would take five years before the amounts lent to flat-buyers and developers had the same weight. He said the bank would be more interested in lending to developers investing in low to medium-priced flats in demand by Shanghai residents. 'The volume of mortgage loans available to flat-buyers now is adequate,' Mr Zhang said. 'The reason many people are unable to buy flats is because property prices, especially those in the city districts, are high.' Mr Zhang said 61 per cent of loans provided were to flat-buyers living outside of the city. 'Prices there are lower and more on par with the wages of the workers,' he said. There are four mortgage loan schemes available to Shanghai residents. The most recent was introduced last month. An individual, after saving with the bank for six months, can apply for a loan of up to 300,000 yuan. Loans do not now require a guarantee from developers. Mr Zhang said that in the first 10 days after the latest scheme was introduced, 12 million yuan was lent. To meet the growing demand, he said, the bank was working out a scheme to be introduced in the first half of next year that allowed individuals to borrow amounts that could double the 300,000-yuan ceiling. Details of the scheme had not been drawn up, but the amount that could be borrowed was calculated using the annual salary increment of the borrower. That means if the borrower chooses a loan that must be repaid within three years, the amount available will include the annual increment of the three years. The bank's first scheme was introduced in May 1992, whereby government provident fund account holders could apply for low-interest loans to buy flats. The provident fund was made up of contributions from workers and employers, with both parties contributing 5 per cent each of an employee's salary to the fund every month. The bank had provided 21,800 households with loans, worth 509 million yuan, in the 31/2 years since the scheme was introduced. The following year the bank introduced a second scheme, which is for non-fund account holders. Applicants need a guarantee from the developers, and 800 households have obtained loans worth one million yuan under this scheme. The third scheme was a combination of the provident fund and non-fund account holder schemes, but only fund account holders could apply. Applicants could apply for loans from the provident fund scheme and use the signed agreement as a mortgage to apply for more funding from the non-fund account holder schemes. Since it was introduced in the second half of this year, 250 households have been awarded such loans. Mr Zhang said all schemes provided loans of up to 70 per cent, with repayment periods of between one and 15 years.