Development of the Nanjing Real Estate Market: Opportunities for Foreign Investors Go back »
2008-11-27 | Nanjing
Development of Real Estate Market in Nanjing: Opportunities for Foreign Investors
Regeneration of old areas
China Daily reported that Nanjing will spend another 30 billion yuan ($4.4 billion) to renovate 3 million sq m of dilapidated residential areas before the end of 2010, according to a government spokesman in November 4th. Huang Chang'an, the spokesman for the Nanjing real estate administrative bureau, said an additional 1.08 billion yuan will go to the low-rent housing system, and that 6 million sq m of affordable apartments will be built before the end of 2010.
Announced at WUF4
The measures were announced after Nanjing won the top UN Habitat award at the ongoing World Urban Forum in the city.
History of project
Since 2002, Nanjing has been committed to renovating the Qinhuai River, a waterway of enchanting scenery and great cultural heritage but seriously polluted by factories and squatter settlements since the 1980s, he said. The local government has spent billions cleaning a 23-km stretch of the river, relocating more than 6,000 squatter families and 159 riverside factories, thereby returning a pleasant living environment to existing neighborhoods.
State of Chinese Real Estate Market -
Considering the desirability of the Chinese Real Estate Market and to avoid speculation on the part of foreign companies and individuals, in the month of July 2006 the Circular No. 171 entitled "Opinions on Regulating the Entry into and the Administration of Foreign Investment in the Real Estate Market" was promulgated. Six Chinese Ministries have worked for the drafting of this text and the result is a birth of some strong restrictions for foreign investors.
Regarding Foreign Invested Real Estate Enterprises (FIREE), the limitations introduced by this move are significant. Where the investment that the companies plan to develop in China exceeds 10 million U $, the capital of that company can not be less than 50% of the expected investment, otherwise if the investment is below that sum, the previous rules on the minimum capital required still remain unchanged. The constitution of a FIREE must be first authorized by the Ministry of Trade and Industry.
Once it is licensed, it will be issued to the new company foreign-invested Enterprise Approval Certificate and the Business License, but these certificates are valid only for one year.
These documents can be achieve permanent status only if the FIREE, in the current year, proceeds to pay the entire cost of the Land ( to use the word ‘own’ accorinding to Chinese law refers to the land use rights).
Another interesting point of Circular n.171 is that if the FIREE has not fully paid up share capital or has not obtained the Certificate of Land Use or when the company is not able by themselves to subsidize at least the 35% of the expected investment, the company will be unable to get credit or loans from Chinese banks, while at the same time it will also be unable to get them from foreign entities without the authorization of the State Administration of Foreign Exchange.
The Circular considers also the possibility of the direct acquisition by a foreign investor of a Chinese real estate entity through the acquisition of the shares of the Chinese part in case of Equity Joint Venture. In this case the investor must pay liability costs to the company with the banks and take responsibility for covering all costs associated with employees and workers (relocation, salary adjustment etc.) The payment transaction must take place in a single solution and equity.
In case of any violation of previous restrictions associated with trade borne by the investor, it will be precluded the company every commercial activity in China. For companies with locations or representative offices in China, they are permitted to purchase real estate properties in China for private use. In other cases, permission will not be given.
Regarding the rights of foreign individuals to buy a Real Estate Property in China, as we have mentioned before, since 2006, the government has issued a series of restrictions and measures in order to control the speculation in the Real Estate field. The procedure for foreign individuals to buy a property in China also became a little bit more complicated.
Jiangsu province has its clear advantages when it comes to attracting foreigner investors, not only because of the many Joint Ventures and WOFEs which have set up their factories in cities such as Suzhou, Wuxi, Nanjing, but also for the outstanding presence of many famous universities which have brought many foreign students in this eastern province of China.
According to the restrictions we have discussed, foreign individuals cannot own Chinese property unless they live in the country by means of legal resident status. Even then, the rules clearly indicate that only one property can be bought and this can only take place if the resident has been living in China for longer than one year, either being employed, or as a student.
The property must be purchased with the real names of the buyers and only for own use or own habitation. Since the law is very strict, certain risks exist.
It might not be possible for a foreigner to keep hold of the property once they are extradited from the country for any reasons. This means that the cost of ownership could become massive if buyers were to lose their right to live in China while owing property.
Whenever legal battles ensue, they could lose their property instantly. Therefore if a foreign individual is interested in buying real property in China, we strongly recommend they apply for permanent residence in order to make them fully qualified to be in possession of a property.
For More Information or Questions please visit the Website of: www.picozzimorigi.cn
Our thanks to EUCCC member Picozzi and Morigi for providing this news.