THE Chinese Government is set to force developers to include substantial numbers of cheap flats in future residential projects, officials have confirmed. Plans being drawn up by mainland authorities could mean companies wanting to build luxury residential projects having to use up to 20 per cent of the site for mass public housing. And developers of up-market commercial blocks, shops or hotels would have to pay local authorities extra money, which would be spent on public flats. The measures are thought to be part of a series of reforms being scrutinised at the Ministry of Construction in Beijing. during a visit to Hong Kong last month, Construction Minister Hou Jie revealed that new regulations to encourage developers to enter the mass market would come into force by the end of the year. Ministry officials outlined the proposals at a conference in the capital but emphasised that they were still being considered. Hou Hungying, of the Department of Real Estate Management, said the 20 per cent figure would be enforced. ''From now on, all the development companies have to contribute up to 20 per cent of their construction volume for residential construction with a low profit,'' he told delegates. ''At the same time, the Government encourages the enterprises to build houses for ordinary families. ''To those helping families short of housing space or selling houses at low prices, including those by fund-raising or co-operative development, the Government will support them in planning, designing and land supply in order to lower the cost and speed up the construction of houses. ''While foreign investment in real estate is continuously encouraged, it should also be guided to focus on those projects fitting in with the state priorities.'' Mr Hou said companies planning developments other than residential would be required to pay local authorities up to 20 per cent of the cost of a mass housing project of the same size. ''If you are responsible for building shopping centres and others like that you may give the corresponding renminbi . . . to the local government. ''They will use the money to build residential housing for the local people.'' He was delivering a speech originally meant to be given by Song Chunmua, the department's director, at a property conference organised by the Institute for International Research. Mr Hou said Mr Song was in another part of the country discussing how the measures could be implemented. China has been cracking down on the property market as part of its austerity programme. It believes developers should switch their emphasis from the luxury market, where there is a major over-supply problem in some areas, to infrastructure and cheap housing projects. Last month a report by the Nomura Research Institute in Hong Kong claimed developers were being asked - or told - to transfer at least 30 per cent of their plans to the mass market in some areas. Delegates at the conference said the plan had not been properly thought out. Colliers Jardine research manager Paul Burke said market conditions in different parts of the country would dictate how strictly it was implemented. ''They clearly have to think it out a bit more. I think they are also wanting to see just how investors will react.'' Alan Macdonald, a director at Urbis Travers Morgan, said: ''There may be resistance to it being comprehensively implemented. ''Local authorities who have not been enjoying as much investment as other areas so far may not want to do it.'' Joseph Lau Ka-chee, China development unit manager at Singapore-based DBS Land, said developers would be put off. ''There is no incentive to build a luxury development right next to mass housing. There would be no commercial value.''
