Hainan cracks down on idle land parcels

Use it or lose it, is the message to owners of undeveloped projects as the authorities look to property investment to battle economic slowdown

PUBLISHED : Monday, 25 August, 2014, 3:31am
UPDATED : Monday, 25 August, 2014, 3:31am

Construction across Hainan has sped up as a government campaign forces property firms to either develop or lose the land parcels they have been hoarding.

The island urgently needs the investment as its economic growth has slowed sharply to 8 per cent in the first half of this year from 9.9 per cent.

Among all provinces, Hainan relies the most on real estate investment, which accounted for 36.3 per cent of its gross domestic product in the first half. The other pillar for the provincial economy is tourism.

Since the State Council endorsed a plan in 2010 to build Hainan into an international tourist destination, investors have been snapping up land. Almost a decade before that, Hainan saw a similar bout of property speculation. Back then, a piece of paper certifying land-use rights would allow investors to borrow from banks or sell it on to others for hefty returns, creating a property bubble that burst a few years later.

But the bubble was never squeezed out completely. These days few residents can afford the luxury flats or villas being built on the island. More than 80 per cent of homebuyers in the top two cities, Haikou and Sanya, are from outside the island.

Developers have been holding 92.8 million sqmetres of land in 1,150 parcels. Construction on these had not started within a year after schedule or had been halted for more than a year, according to a report released in May by the land bureau.

"All good land plots in Hainan, including those along the coastal line or around the lakes, are no longer in the government's hand. All are with enterprises. Some are developers, others are speculators," said Lin Qi, the president of developer Shuangda Group, which has invested in the province.

"Many of them have no development plans. They just want to hoard the land and wait for revaluation gains. But then, who else will invest in Hainan? Where can the government get money for infrastructure construction? So the government needs to recover the land and reauction them for development," Lin told the South China Morning Post on the sidelines of a recent property forum in Boao, Hainan.

The venue for the forum was developed by state-owned Cosco Group, the country's biggest shipping conglomerate. The company bought the entire 1.7 million sqmetre Dongyu island in Boao for about 58 million yuan in 2001 to develop it into a permanent venue for the Boao Forum For Asia. The forum has since evolved into a high-level talk fest graced by statesmen, business and thought leaders.

But 87.5 per cent of this site remains undeveloped, according to Hainan's provincial land bureau. It has been discussing a solution with 12 companies, including Cosco, which together hold a third of idle land in Hainan.

Zhang Yunwen, the general secretary of the Real Estate Chamber of Commerce in Hainan, said developers turned hesitant as the outlook dimmed.

"They wanted to slow down. So the government wants to give them a push," Zhang said, pointing out that such drives were not unique to Hainan.

Mainland media have been reporting that Hong Kong developers, including those controlled by Li Ka-shing, have delayed construction of projects in various mainland cities for up to 10 years while the value of their holdings appreciated steeply.

However, the Hainan campaign concluded that 74 per cent of construction delays could be blamed on local governments as they failed to build the basic infrastructure, sufficiently compensate original dwellers or update their development plans.

If the government does not convert land use of a specific plot from arable to construction, developers were likely to violate the law, Lin said. However, they are usually compensated for land that is taken back by the government.

It has been a common issue across the mainland, according to annual reports by the Ministry of Land and Resources on illegal land use, and is one of the reasons that drove the central authorities to carry out since middle of the month a national audit on local governments' land sale premiums.