In a heavy blow to local real-estate developers, the Shenzhen municipal government has decided to strictly follow the Central Government's new regulations for the property market, which include the imposition of a 70 percent quota for smaller apartments.

 

The city government publicized its bylaws for the Central Government regulations Tuesday, three weeks after the Central Government issued the new regulations.

 

According to the Central Government regulations, the number of flats under 90 square meters in a certain area must account for at least 70 percent of the units built in each project. Developers had hoped that Shenzhen, as an affluent city, would raise the ceiling for larger apartments.

 

In a news release yesterday, the Shenzhen municipal government has required all developers to strictly follow the quota in their new projects and change the designs of projects that have not yet started construction. "If, for some special reasons, a developer needs to raise the ratio of large flats, he must obtain permission from the Ministry of Construction," says the news release.

 

"The bylaws demonstrates the city government's determination to enforce the Central Government regulations," said Zhang Wei, an analyst with the real-estate consultancy Central China.

 

The bylaws have dealt a heavy blow to local developers who had been expecting the city government to raise the quota for large apartments, said Zhang.

 

"The profit margin of small flats is much lower than large houses," said Zhang, adding that many developers will be forced out of the market because of the regulations.

 

The city government organized a meeting for major real-estate developers yesterday to explain the bylaws. It was not clear what was discussed in the meeting.

 

Both Zhang and Xiao Xiaoping, an analyst with real-estate agency Shihua, said the new regulations would help lower the property prices in Shenzhen.

 

"The expensive luxury apartments are the main reason for the high property prices on the market," said Xiao. "A lot of people have to buy a large flat because there are few small flats for them to choose from," said Xiao.

 

Zhang said the regulation will increase the supply of apartments in Shenzhen, and therefore, lower the property prices, but he feared that developers might produce substandard houses if their profit margin was slashed.

 

(Shenzhen Daily June 21, 2006)