The State Council, or Cabinet, on Wednesday announced a new real-estate stimulus package emphasizing low-income housing and home ownership.

It was unveiled at an executive meeting of the Council, presided over by Premier Wen Jiabao.

The government said the package will benefit 7.5 million low-income urban families and 2.4 million households in shantytowns in the next three years. Rural homes in dangerous condition will also be renovated.

According to the new package, someone who has owned their home for two or more years, can now sell it without having to pay business taxes. Previously, owners had to wait at least five years before selling their house tax-free.

If they sell their house after less than two years, owners only have to pay taxes levied on the profit, not the sales price.

The tax rate of five percent, has not changed.

This policy is an interim measure, valid for one year, according the statement issued at the meeting.

To boost home buying, the government will now allow people with "smaller-than-average" apartments to buy a second apartment under favorable loan terms. Size limits are different in every city.

The government also called for financial institutions to lend more for mergers and acquisitions among property developers.

The package was the government's latest move to prop up the ailing sector. Previous boosting measures included pledging to build more low-income housing and cutting mortgage rates and down payments for first home buyers.

The move was really significant for the sector's development and helpful to counter the industry downturn, said Gu Yunchang, official with Ministry of Housing and Urban-rural Development.

Property prices in 70 major Chinese cities rose 0.2 percent in November from a year earlier. The growth rate was the lowest since the government started to publish the figure in July, 2005.

A total of 2.7 trillion yuan (US$387.5 billion) was pumped into real estate development nationwide in the first 11 months of the year, up 22.7 percent year-on-year. However, the growth rate was 1.9 percentage points lower than the January-October level.

Between January and November, total sales were 490 million sq m, down 18.3 percent year-on-year. Residential sales fell 18.8 percent.

Gu expected the sector to start reviving in the second half of 2009 after the impacts of boosting measures.

After the State Council statement, the People's Bank of China, the central bank, and China Banking Regulatory Commission, jointly announced new rules on lending to developers of low-rent housing. These developers could enjoy a lower lending rate, 10 percent down from the current benchmark lending rate.

Last month, the central bank cut the lending and deposit rates by a bigger-than-expected 1.08 percentage points, following a 4 trillion yuan stimulus package aiming to spur the economy by enhancing domestic demand.

(Xinhua News Agency December 17, 2008)