Private capital to face wider choices (2)

16:22, May 14, 2010      

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Focus 2: Encourage the utilization of private investments to build policy-based housing

"The state will support and guide the utilization of private investments to build economically affordable housing, public rental housing and other policy-based housing, and participate in the rebuilding of shantytowns to allow people living in those areas the enjoyment of corresponding preferential policies."

Chen Zhi, deputy secretary general of the Beijing Real Estate Association, said that the new policies need clear guarantee measures. He believes that all the current policy-based housing constructions are undertaken by state-owned enterprises. The policy-based housing is much wanted and therefore, other types of investments should also be used to expand the scale.

Although the new policies with 36 articles encourage the absorption of private investments, they should be in reality, subdivided to avoid risks brought after private capital participates in the investments. Many policy-based housing have fixed sales prices while the prices of land and building materials remain volatile. How can the profits of private capital be protected then? Furthermore, if the policy-based housing cannot find a good market, the construction capital may not be taken back. Who should undertake the risk then? Moreover, what position will private capital take when participating in investments, and is it the developer or someone else? Chen suggested that private enterprises should provide services and funds and then charge service fees and interests which is higher than that of the bank. This can avoid risks and increase private investors' initiative.

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