HONG KONG - Buying housing could be a
risky business in China as the booming property
market is rife with development irregularities.
It may sound ridiculous that apartments on
sale are often built on land for which ownership
has yet to be settled. But this is quite a common
practice in some Chinese cities, where buildings
are erected on problematic sites.
But
developers in some cities defend their illegal
actions, saying
that
earmarking land for construction projects before
it has been approved by the provincial government
for such use is a normal practice for local
governments wishing to promote development.
Last spring, Tonghai Construction and
Engineering Co in Liaoyang county of Liaoning
province in northeastern China started to develop
a property project on a 2.09-hectare site.
However, it was not until September that the local
government received approval from the Liaoning
provincial government to use the land for
construction.
At the beginning of this
year, four blocks sprang up on the site, with most
of the apartments sold. However, it was not until
January 1 that the site was put up for sale in the
Liaoyang Land Bank and Exchange Center at a
reserved price of 4 million yuan (US$516,500).
"The estate has 200 apartments in total,
with prices between 1,600 yuan and 1,800 yuan a
square meter. Most of them have been sold and
there are [only] about 20 flats left," a sales
representative told a Chinese reporter posing as a
buyer.
Behind the sales counter there was
a large piece of paper on the wall filled with
names of purchasers of the apartments, with a
notice on the bottom that read: "No change and no
refund after payment."
When asked whether
the legal procedures for handling land and
property development had been followed, or whether
a property-rights certificate could be issued, the
sales agent took out piles of paper from his desk
and said: "These are all the contracts and the
payment receipts. So many people have bought the
apartments - what worries do you still have?"
After being queried about property rights,
the agent became very annoyed and said loudly: "We
have been selling apartments like this! Take it or
leave it. Don't ask such questions anymore!"
In response to questions about Tonghai's
possible illegal activities, Cai Wei, chief of the
county's Land and Resources Bureau, said that
having developed the site, Tonghai had not paid
premiums for the land to the government, which
constitutes an illegal land grab.
According to the country's land-use and
property-development rules, developers have to get
the land they need through public tender, and then
obtain planning and building permits. Finally,
they have to obtain a pre-sale permit before
selling their properties.
"As Tonghai has
never [obtained] the land-use rights, who else
would give it planning, building or pre-sale
permits? Its property project is a total illegal
act," Cai said.
He said Tonghai has been
ordered to stop construction three times and fined
10,000 yuan (less than $1,300).
"The
property projects can generate millions of yuan
for the developer, who just pay a 10,000 yuan
fine, which is no deterrence to the developer,"
another official at the county Land and Resources
Bureau said while pounding his fist on his desk.
County officials say such illegal land
grabs are commonplace, which they blamed on
property-development rules not being implemented.
"Local governments do not strictly abide
by the country's rules," the official said.
"Instead they adopt another principle called
'projects followed by land', which means a
developer has been hand-picked before the site is
put up for sale. Then the developer pays the
compensation and resettlement fees, which a local
government is supposed to do, while paying the
land premiums."
Many believe the Tonghai
case is only the tip of the iceberg. According to
the Ministry of Land and Resources, the number of
illegal land-grab cases increased sharply last
year.
In a circular on its website
recently, the ministry said 131,077 cases of
illegal land use were uncovered across the country
last year, up 17.3% over 2005. It said the cases
involved about 100,000 hectares of land, up 76.7%
over 2005, with 43,000 hectares of farmland
affected, an annual increase of 67.6%.
The
ministry also said 3,593 people, including two
provincial-level officials, were punished after
90,340 cases of land use violations were
investigated last year. It said it detected in
time and stopped about 35,000 illegal land-use
activities, preventing a potential economic loss
of 1.64 billion yuan.
Zhang Xinbao,
director of the ministry's Execution and
Supervision Department, was quoted by the mainland
media as saying that the continued violations in
land use were mainly caused by local governments'
blind pursuit of economic growth and failure to
implement laws.
Zhang said local
governments do not openly defy the law, but often
secretly allow illegal land grabs to lure
investment and improve their performance.
However, Zhao Yanqing, vice chief engineer
of the China Academy of Urban Planning and Design,
said local governments are forced by the rapid
urbanization of China to increase land grabs.
"China is undergoing rapid urbanization,
which has placed a heavier burden on local
governments to build basic infrastructure and
launch property developments at the same time. The
latter seems more important for them to fulfill,"
she said.
She also attributed the local
authorities' illegal land grabs to narrow income
channels.
"Regarding the income channel
for public service, local governments in China are
not like those in the Western countries, which
have a sustainable and recurring source of income
- property tax - so they have to rely on land
sales to support public-service expenditure. And
attracting investment and encouraging industrial
development have become the main methods for them
to provide public service," she said.
However, the rampant acquisition of land
from farmers by local governments has triggered
large riots and seen property prices soar.
An expert with the Chinese Academy of
Social Sciences said: "Despite the Chinese
government's strengthening efforts to curb soaring
property prices, the prices go up further. This is
because the problem is entangled in corrupt
dealings between local governments and
developers."
To curb the problem of local
governments' backing illegal land grabs to attract
investment with the offer of a "zero land-use
fee", the ministry has set minimum sale prices for
land earmarked for industrial use, starting this
year. It banned local authorities from leasing
land from farmers for construction purposes, a
method that has been increasingly used to dodge
taxes associated with land sales and avoid review
by higher authorities.
At this year's
annual session of the National People's Congress
early this month, Premier Wen Jiabao pledged to
get tough on land-use violations to protect
farmers' rights.
However, Zhao said the
illegal land grab is a systemic problem that is
not likely to be eliminated any time soon.
Olivia Chung is a senior Asia
Times Online reporter.
(Copyright 2007
Asia Times Online Ltd. All rights reserved. Please
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