Grand Sun proposes trust fund to build affordable homes for young
Mainland developer Grand Sun Real Estate may not be big in Nanjing but it earned overnight fame after it announced plans to cooperate with young people to build affordable homes for them.
Sun Tianyuan, a director at Grand Sun, said he wanted to do something about soaring home prices that put flats beyond the affordability of first-time home buyers.
"I was once their age. I understand fresh graduates' hardship of being squeezed into tiny flats without toilets and windows. I felt heartbroken after reading news of young people forced to give up their dreams as they cannot afford to stay in Beijing, Shanghai and Guangzhou because of sky-high property prices," he said.
Sun wants to reverse that trend by letting young people determine the price and design of their homes.
After meeting with more than 100 young people, he found most of them wanted flats from 80 to 100 square metres in size, located near subway stations, and within a budget of 1 million yuan (HK$1.24 million) to 1.5 million yuan.
Under current rules, prospective homebuyers must pay an initial sum of 30 per cent or 300,000 yuan if they want a unit costing 1 million yuan.
"They can chip in the 30 per cent initial payment as a shareholder of the scheme," Sun said.
To safeguard investors, all money raised would be kept in a trust fund strictly reserved for use in construction of a specific project. If they decide not to buy a unit in the end, they receive a dividend as an investor.
"In a depressed market, most developers are willing to team up with us because we have a group of potential buyers," Sun said. "It will help save marketing and other administrative expenses."
He said flats built under this scheme could be 20 per cent lower than retail prices.
Nanjing resident Lu Haichang, 26, is one of the dozen potential investors so far.
Lu and his girlfriend, who are planning to get married this year, have been looking for a flat for the past 12 months.
"But the prices are too high for us," said Lu, who has worked as an assistant to the manager in a private firm since graduating from university four years ago.
Lu and his girlfriend together earn 12,000 yuan a month and, like many other young people, cannot afford to buy their own home in Nanjing, where prices in the city have risen more 14 per cent year on year.
Sun said every year there were 200,000 university graduates in Nanjing, and most of them stayed and worked in the city.
Cooperative schemes earmarked to build affordable homes for young people also raise concerns as there is no regulation to protect such investors.
"Development is a capital-intensive industry and the management will become complicated if hundreds of investors are involved in the fund," said a property consultant in Nanjing.