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New Rules Aim to Clean Up Land Leasing Deals
The central government announced new land leasing rules yesterday aiming to improve transparency and stop property developers from signing sweetheart deals with local officials.

In a related move, the central government is working on new mortgage rules to prevent the country's hot real estate market developing into a bubble.

The Ministry of Land and Resources published new regulations yesterday requiring all land leasing deals that don't involve open bidding to be made public within seven days after the contract is signed. The regulations also set minimum prices for land leased out in this method. The regulations go into effect on August 1.

Last July, the ministry stated that all land made available by provincial or municipal governments for commercial use must be disposed of through open bidding.

The rules didn't include land used for non-commercial purposes, such as government building, industrial parks and infrastructure projects.

Local governments, however are still allowed to lease out such land by negotiating with a single developer.

That system, however, has been exploited by some unscrupulous officials who profit from backroom deals. Such deals have led to land-leasing scandals involving Chinese-born tycoon Yang Bin in Shenyang, northeastern Liaoning Province. Yang was recently tried in Shenyang.

Under the new rules, any land deals that don't involve public bidding must be published in a newspaper ad or on a government Website within seven days after the contract is signed. The ads must run for at least 15 days.

The regulations do not, however, include an appeal process for anyone who thinks the contract is unfair.

They do include minimum prices for government land, which vary by region. The ministry didn't announce those minimum prices yesterday.

"The land leasing sector should entirely adopt the market economy, under which the procedure will be more transparent," Land and Resources Minister Tian Fengshan said.

Despite rules requiring open bidding on all commercial land, the process was only used for 15 percent of all land leasing projects in China last year.

Meanwhile, to keep property prices from rising too quickly across the nation, the government is working out new mortgage rules that would force homebuyers to put up a larger down payment when buying a second home, according to Zhang Rongfang, a spokesman for the People's Bank of China.

Currently, homebuyers must put up a minimum down payment of 20 percent of a home's value to be eligible for a mortgage.

About 16 percent of all new bank loans in the country during the last two years were granted to homebuyers.

"Understandably, the regulators are concerned about a possible real estate bubble, particularly in the prices of residential development in major cities," said Terry Chan, an analyst of Standard & Poor's.

The outstanding value of mortgages in Shanghai stood at 125.5 billion yuan (US$15.12 billion) at the end of May, up 61.8 percent from a year earlier.

Nationwide, there were 825.3 billion yuan worth of outstanding mortgages at the end of last year, compared with just 19 billion yuan at the end of 1997.

The new system should raise investor confidence in the real estate industry and help the market develop in a more healthy way, said Fan Wei, president of Shanghai Forte Land Co Ltd.

(eastday.com June 26, 2003)

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