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Economy Housing Gains Favour
While foreign real estate developers continue to invest in China's luxury real estate projects, a number of Singapore business people are turning their attention to "economy housing."
"Negotiations with some Singapore developers are under way," said an official with the Beijing Municipal Construction Commission, who was identified as Mr Qin. But he declined to give further details.
Reliable sources said the developers are pushing the local government to allow them to build a certain amount of luxury properties and public facilities when developing the economy housing residential areas.
The developers are also selecting proper local partners to set up joint ventures, because the real estate situation in China and Singapore are different.
"These business people will provide a model for foreign real estate developers' involvement in China's economy housing," said Yin Weihong of Beijing Achievement Commerce and Investment Consultants Co Ltd.
Economy housing refers to housing built on land allocated by local governments and enjoys more favourable treatment including reductions or exemptions of some taxes and fees. It is designed for medium and low-income families.
Foreign real estate companies enjoy the same treatment as domestic companies when participating in economy housing development, according to Jiang Wanrong of the Ministry of Construction.
China has built about 100 million square metres of economy housing nationwide, of which 70 per cent to 80 per cent has been sold.
"Profits are small, but there are fewer risks in economy housing development," Yin said.
The central government stipulates that profit earned from economy housing developments will be only 3 per cent of total housing costs, but profits should be more than that when developers manage to improve efficiency, she said.
"Excellent sales have reduced the risks of real estate development to the lowest level," Yin said.
Statistics indicate that 4.5 million square metres of economy housing space were begun in Beijing during 1999, with 1.5 million square metres completed before the end of 1999, and 1 million square metres sold.
Economy housing priced at less than 3,000 yuan (US$361) per square metre has become the hottest real estate in the Chinese capital, said Li Yong of the Beijing Tianhong Group, which is developing a economy housing project in Huilongguang in Northern Beijing.
"We have sold more than 90 per cent of the 700,000 square metres of economy housing we have built which will be ready for occupation at the end of May," he said.
Other projects such as the Tiantongyuan project in Northern Beijing and the Tonghuijiayuan project in Eastern Beijing have also reported excellent sales.
According to construction Vice-Minister Song Chunhua, more than 5,000 overseas real estate enterprises, or 20 per cent of the country's total, have participated in real estate development in China. Annual overseas investment in real estate is now valued at more than 4 billion yuan (US$481 million).
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