Why is illegal property hot in China?

17:36, August 07, 2009      

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"Small housing property" means that the property certificate has not been given by the national government, but by the township government. Hence, the so called small housing property right is actually the rural housing property right, and it means the real property right is not law binding. So "small property right" actually carries no property rights at all.

Compared with commercial real estate, "small housing property" doesn't have a land remise fund or the high profits of developers. So currently, its price is naturally 1/3 or more lower than that of real estate in the same area. That is the fundamental reason for most residents in urban areas buy "small housing property" in rural areas under the risk of having no property rights.

Cheap, but risky

First, the legal risk. It does not conform to Chinese laws and can therefore not be protected by law. Due to the rural housing property not being recognized by law and not being registered in the housing management department of government, there are very limited relief channels for home owners when they have troubles on issues like house quality and maintenance of facilities.

Second, the policy risk. After paying for the home, some projects will be ceased and even torn down. In addition, when facing land demolition by government, the owners can only get a little compensation.

Third, the risk of prepayment. At present, there are no laws or regulations to regulate and supervise "Small housing property", so buyers prepayment for houses can not be guaranteed without supervision by government and banks if developers have problems during construction such as lack of capital.

Fourth, the risk of after-sales service. The property management is also vulnerable to problems after owners move in.

Fifth, the investment risk. In light of "Small housing property" not recognized and protected by laws, it doesn’t own the legal formalities and also can not be traded.

Government attitude

In June, 2009, an official from the Ministry of Land and Resources stated that leaders of townships have no right to lend or transfer the collective land to build real estate. It is illegal to take up farmland to build houses to trade.

Building commercial property on farmland has to go through legal procedures for land transfer, said the official.

By People's Daily Online
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