Shenzhen relaxes rules for developers buying land, backing away from the cap that sent real estate auctions into a tailspin

According to the Shenzhen Planning and Natural Resources Bureau, more than one developer will be allowed to bid for land at the same price

The competition will be based on how many homes they can build under the “affordable” price category

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A sales agent and the model of a property development at the 5th China (Shenzhen) Real Estate Fair in Shenzhen on May 4, 2010. Photo: Reuters.

Published: 11:00am, 3 Nov 2021Updated: 11:07am, 3 Nov 2021

Shenzhen has relaxed the conditions for taking part in land sales, one of the first among China’s local authorities to backtrack from the draconian measures that have sent the entire country’s real estate industry into a tailspin.

According to the new rules laid out by the Planning and Natural Resources Bureau of China’s technology metropolis, more than one developer will be allowed to bid for land at the same price, where the competition will be based on how many homes they can build under the “affordable” price category. The bureau put 11 plots on the market last week, the third land sale this year.

The relaxation followed a disastrous round of land sales when 206 land parcels were withdrawn from auctions around the country since September, as the central bank’s tight caps on loans backfired and drove cash-starved and risk-averse developers to the sidelines. The tepid uptake was also the market’s response to the government’s move to centralise land sales across 22 large cities into three annual auctions.

“It is good for developers’ cash flow as they can sell affordable homes while public rental homes are only for collecting rent,” said Yan Yuejin, director of E-house China Research and Development Institute. “The change is to lure more developers to purchase lands. Many of them struggled with their liquidity and chose to sit aside last time, and we saw many land withdrawn in the second round of land auctions.”

A view Shenzhen on August 4, 2019. Photo: Bloomberg.

The withdrawal of land sales represented about a third of the 700 parcels offered across 22 cities including Beijing, Shanghai, Guangzhou and Shenzhen. Land sales are major sources of receipt for local authorities, which earn up to 80 per cent of their fiscal income from renting out the right to use state property for building private homes.

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