With housing prices surging, the Shanghai government is planning to offer more financial aid to local homebuyers.

The city is looking at plans to increase the amount of money families can borrow in low-interest loans from its housing accumulation fund, into which all employees and employers in the city pay.

The current ceiling is 100,000 yuan (US$12,048) per family.

"It will be a large-scale rise in the amount people may borrow from the fund," said Wan Zengwei, director of Shanghai Public Housing Fund Management Center.

But the ceiling won't be raised as high as it is in Beijing, where families can borrow up to 300,000 yuan to buy a home, Wan said.

The 100,000 yuan limit was set in 1996, according to housing prices in Shanghai at that time.

In 1996, a 60-square-meter apartment in downtown Shanghai cost about 150,000 yuan.

"Obviously, it no longer matches the current situation," said Wan.

The city's housing prices have more than doubled over the past seven years. This year, prices are expected to grow by more than 30 percent.

The benchmark of Shanghai's housing market, the Shanghai Real Estate Index increased 29 percent in the first 10 months of this year. In October alone, the index rose 1.9 percent, the Shanghai Real Estate Index Office reported yesterday.

Currently, second-hand apartments within the Outer Ring Road are generally priced above 5,000 yuan per square meter, while no new residential projects cheaper than 7,000 yuan per square meter are available in the area.

Increasing the amount of money people may borrow from the accumulation fund is an effective way to help common home seekers, because every family can borrow money from the fund for one home at a time, said Chen Sheng of the real estate office.

That means real estate investors will not be able to borrow from the fund.

About 2 million local families have borrowed from the housing accumulation fund. Mid- and low-income families are major borrowers, with about 52 percent of the beneficiaries earning less than 2,000 yuan a month.

(Shanghai Daily November 13, 2003)