Shanghai's real estate developers may be able to decide the proportion of small and medium-size homes in a residential development soon as the 70-percent requirement has been relaxed.

In a land bidding document released on Tuesday by the Shanghai Urban Planning, Land and Resources Administration Bureau, no restriction on the proportion of apartments with a size of less than 90 square meters was set for property development on a 210,288-square-meter piece of land in Zhaoxiang, Qingpu District, the largest plot designated for residential use offered in Shanghai this year.

"The relaxation of the 70/90 restriction will allow developers to have more flexibility to build the right products to respond to market demand," said Hingyin Lee, director of research and advisory for east China operation at property services firm Colliers International. "By doing so, it helps achieve better supply-demand balance, both in the mass market and the luxury segment."

Shanghai is not the first city in the country to loosen the requirement. Nanjing and Beijing have also done so recently.

In May 2006, the then Ministry of Construction, now the Ministry of Housing and Urban-Rural Development, announced that the combined gross floor area of all residential units below 90 square meters in size should account for more than 70 percent of a project.

The policy, applied to residential developments given approval to commence work after June 1, 2006, was designed to raise the supply of small and medium-size houses and discourage the building of luxury homes.

"While the original purpose to launch such an initiative was to offer people more affordable housing, especially in central areas of the city, the scheme seems to have been unsuccessful so far," said Jenny Wu, director of residential for east China operation at real estate services provider DTZ.

"The lifting of such a cap will enable developers to design their apartments catering for real market demand and therefore offer home buyers better housing products."

The majority of small and medium-size homes have been built in suburban areas where demand for larger homes was robust.

(Shanghai Daily June 18, 2009)