The Shanghai city government is considering increasing plot ratios for selected urban redevelopment projects to encourage private sector participation to speed up the upgrading of rundown areas. A plot ratio of 2.5 times is allowed for residential projects in central locations, but sources said the municipal government was formulating an idea to raise the ceiling to 3.5 times. The plot ratio - the maximum potential gross built floor areas to land area - is a measure of development intensity. A higher ratio means developers can build bigger projects, resulting in higher earnings. 'If the plan materialises, it will be the latest effort from the government to speed up the pace of redeveloping obsolete urban areas into modern commercial and residential developments,' said a source. The city government was unavailable for comment yesterday. Developers and property consultants welcomed news that the increase in plot ratios is under consideration even though they did not believe it would become generally applicable to all redevelopments. 'Controlling development intensity and restricting wind-blocking high-rises in city areas have become a normal trend in big cities worldwide. And I believe Shanghai will follow this,' said John Yip Ying-chee, an executive director of Henderson Land Development. Mr Yip said he had not heard talk of raising plot ratios in central Shanghai but he did not rule out the possibility of government relaxations in selected sites to attract developers. Redeveloping old areas is a key task of the government as this can improve residents' living standards. Vacant sites designated for upgraded residential or commercial development could also be sold at higher prices to developers as a way of boosting government revenues, said property consultants. However, the price of central property has risen since housing improvements began three years ago and residents in targeted areas are asking for higher relocation compensation with cash, a new house or a combination package. These increased expectations have prompted property companies to delay redevelopment projects, claiming they will see reduced profit from developing the old quarters, according to Jim Yip Kin-shing, the head of investment for North China at DTZ. While the government had asked quality state-owned construction companies to build all the planned relocation projects, sources said it had been thinking of methods to attract private sector participation and one idea was to increase projected profitability by increasing plot ratios. Lina Wong, the managing director of property consultant Colliers International's East China region, said she was aware of the plan but this did not address another problem slowing the pace of urban redevelopment, namely that residents of old developments due for renewal did not want to move into the suburbs. Targeted families have been unwilling to move partly because of a lack of transport and other services compared with city living. The challenges have been noted by the government and last week city officials met and pledged to increase the scale of relocation projects and government investment on urban resettlement and redevelopment. The officials said banks could extend loan repayment dates for developers or offer more attractive loan rates for urban redevelopment projects, according to the media. At last week's meeting, mayor Han Zheng also urged the authorities to improve bus and rail links to the new housing estates. The government is also planning to buy low and medium-cost units from private developments in city areas to encourage families to move out of their homes.