Economy

Funds a challenge for affordable homes: Cushman

By Bonnie Cao (China Daily)
Updated: 2011-03-25 11:28

BEIJING - China's biggest challenge in its plan to build 36 million affordable homes over five years is the ability to tap funding and draw developers to work on the projects, Cushman & Wakefield Inc said.

The nation needs 1.3 trillion yuan ($198 billion) for its affordable homes this year, excluding land costs, Housing and Urban-Rural Development Vice-Minister Qi Ji said on March 9. The central and local governments will provide 500 billion yuan, Qi said.

"Money is going to be a challenge," Andy Zhang, China managing director for the New York-based real estate company, said in an interview in Beijing on Wednesday. "The local governments still rely heavily on land sales for their revenue, while the central government requires them to resolve the financing of those homes."

The plan for affordable homes aims to cover 20 percent of China's housing market over the five years. The government is accelerating these developments after property prices climbed for 19 months through December, and increased in 68 of the 70 cities it monitors in the first two months of 2011, based on the statistics bureau's new format of reporting housing data.

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The government imposed new curbs this year, including higher minimum down payments for second homes and residential property taxes in Shanghai and Chongqing. The measures will help in "buying some time" until the supply of affordable homes, which will take at least two years to have an effect, said Zhang. The government said earlier this month that its target includes the development of 10 million homes this year and next.

New home prices in China's biggest cities, where most developers have built residential projects, continued to rise. For developers, "business is business", Zhang said.

"Developers are certainly not proactive in participating in the development of these homes unless they don't have a choice. The government may offer subsidies and tax breaks to ensure the projects are profitable."

China State Construction International Holdings Ltd, a State-owned Hong Kong listed builder, plans to build more of these projects, including two developments in Chongqing, Chairman Kong Qingping said in an interview on March 7. "The return rates of building social housing is low, but it also has low risks," Kong said.

China Vanke Co, the country's biggest publicly traded developer, will "proactively" build affordable homes, and future projects will include such properties, Executive Vice-President Liu Aiming said on Feb 24.

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