Affordable housing highlighted in curbing soaring home prices

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Discussions sizzle over whether the affordable housing program launched by the government is effective in reining in the rapid rise of housing prices in China during the ongoing legislative sessions in Beijing.

"The key factors lie in the details of the affordable housing program, such as the total amount, capital source and schedule," Cao Honghui, a senior researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, said Wednesday.

"And if the program is successfully implemented, it will help cool the red-hot property market," he told Xinhua.

China planned to build 10 million units of affordable housing this year, and it is part of a commitment to construct 36 million low-cost homes over the next five years.

When completed, the program would cover 20 percent of the country's total housing supply.

Last year, land authorized for building affordable housing took up 82.3 percent of China' s total housing land supply.

"An estimate of investment for 10 million units of affordable housing, say, 70 square meters per unit on average, would be 1.4 trillion yuan (212.93 billion U.S. dollars), accounting for 5 percent of last year's fixed asset investment in the whole society," said Zhu Zhongyi, deputy chairman of the China Real Estate Association.

In a press conference on Monday, Finance Minister Xie Xuren said China will take precedence in spending its land transfer revenue on building affordable houses.

China's land transfer revenue rose 106.2 percent year on year to 2.94 trillion yuan last year, Xie said.

Yu Lian, president of the China City Construction Holding Group Company, said that he suggested that the government transform affordable housing tasks into an industry, in contrast to the real estate industry.

"The affordable housing industry mainly caters to people's basic housing demands, while the real estate industry will assist people who want to improve their housing conditions or help meet people's investing demand," Yu said.

Though the affordable housing industry may have a comparatively low profit rate, "it can be profitable given its large scale, and thus banks would surely be willing to provide loans to the industry," said Yang Yuanqing, the president of Lenovo and also a member of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC).

Ma Mingzhe, the president of China Pingan, suggested that insurance capital be used to support the building of affordable houses, which is also beneficial to long-term investment income.

Jia Kang, head of the Research Institute for Fiscal Science of the Ministry of Finance, suggested the formulation of a program that would funnel some of the revenues from low-rent houses into the development of new affordable houses.

China's investment on building 10 million units of affordable homes in 2011 will range from about 1.3 trillion yuan to 1.4 trillion yuan, said Qi Ji, vice minister of housing and urban-rural development on Wednesday.

Of the total, 500 billion yuan will be provided by central and local governments, and the rest will be raised by public institutions and businesses, Qi said.

"Although the capital supply for affordable houses may be promising, I would strongly advise authorities to lay down timetables for the location, construction and distribution soon," Cao Honghui added.

Although the real effect of affordable housing on curbing home prices is unknown, experts agree that establishing an affordable housing system is a big step forward.

In the past few years, the central government has stepped up measures to rein in soaring housing prices, a primary source of public complaint in major Chinese cities. However, property prices have remained stubbornly high.

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