Bloomberg News

China Issues Idle Land Rules Amendments to Curb Speculation

December 22, 2011

(Updates with closing share prices and PBOC survey in ninth, 10th paragraphs.)

Dec. 22 (Bloomberg) -- China has ordered companies to begin construction on idle land to deter speculators from hoarding sites in amendments to draft rules.

Land holders should start building on sites within three months from receiving the order, the Ministry of Land and Resources said in a statement yesterday, seeking public opinions. Land sitting idle for a year will incur a penalty of 20 percent of the price, while the government may reclaim the unused land after two years without compensation, it said.

China introduced rules on idle land in 2005, though they weren’t enforced properly because of the interests of local governments that are usually intertwined with those of developers, said Fu Qi, a Shanghai-based analyst for China Real Estate Information Corp., a property data and consulting firm. About 40 percent of local governments’ revenue last year came from land sales, according to the firm.

“It is a little too late to issue such rules and we should ask why the rules were hard to enforce,” Fu said. “The rules shouldn’t be one-size-fits-all. The government should punish harder companies that are not capable of development, but simply speculate on land prices.”

The government said last week it won’t back away from real estate industry curbs that are damping home sales and pulling down prices. China intensified measures this year including home-purchase restrictions in 40 cities and higher mortgage requirements.

Selling Land

Chinese developers may sell land and other assets for cash as the curbs continue. Greentown China Holdings Ltd., the biggest builder in the eastern Zhejiang province, is seeking to sell holdings in the most expensive land transacted last year, 21st Century Business Herald reported today, citing unidentified people with knowledge of matter. The company’s Chief Financial Officer, Simon Fung, declined to comment on the report.

Greentown’s sales slumped 34 percent in the first 11 months this year from the same period last year. Greentown shares rose 1.7 percent to HK$3.68 at the 4 p.m. close of Hong Kong trading.

About 14 percent of households are willing to buy homes next quarter, 0.3 percentage point lower than last quarter, China’s central bank said in a quarterly survey today. Property dropped off as the top investment for households last quarter in favor of funds and wealth management products, it said.

A gauge of real estate stocks on the Shanghai Composite Index dropped 0.2 percent at the 3 p.m. local close, declining for a second day.

--Bonnie Cao. Editor: Andreea Papuc

To contact Bloomberg News staff for this story: Bonnie Cao in Shanghai at bcao4@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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