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High hopes for low-income housingPublished: 23 Dec 2009 07:02:02 PST

A resident named Guan Manfeng receives the keys to a low-income house in Wuhan, Hubei Province. Photo: IC


By Zhao Qian

Jiachunyuan, a 2,780-unit affordable housing project in Tianjin financed by the country's first low-income housing investment fund broke ground over the weekend. It has grabbed the attention of not only low-income Tianjin residents but also analysts all over the country because extending the financing channels for affordable housing is becoming increasingly important as urban populations throughout China continue to swell.

The low-income housing investment fund that boosters say may go as high as 5 billion yuan ($732 million) was launched this June. An employee of the Tianjin Real Estate Development Management Group Co, the project's developer declined to say how much the fund has raised to date.

Zhang Yong, the general manager of the State-owned developer attending 3th China International Private Equity Forum in Tianjin, described the fund as a kind of private equity fund that will increase financing channels for the low-income housing construction.

At present, major portions of the fund come from central and local government fiscal revenue and local government land sales profits and from an unspent portion of the national Housing Fund.

No less than 10 percent of the local governments' income from land sales must be spent on building affordable housing projects, according to the low-income housing fund management guidelines released by the Ministry of Finance at the end of 2007.

"But most local governments do not follow the guidelines strictly and spend less of their land sales profits," said Chen Guoqiang, director of the real estate research center of the Peking University.

Central government pressure

But because the central government has announced several times last month that it plans to increase the supply of low-cost homes, expanding the financing channels has become a hot topic.

"Extending the financing channels for building affordable houses is really necessary especially when the government plans to enlarge the scale of the low income houses," Chen said.

Increasing the number of affordable homes was highlighted on December 14 when new guidelines were released following an executive meeting of the State Council chaired by Premier Wen Jiabao. Zhang Ping, director of the National Development and Reform Commission, also confirmed that on December 9. On November 28, Wen said in Shanghai that China would enact fiscal, financial and land policies to support the construction of low-income housing.

Consequently all eyes are on Tianjin's model and some other low-income housing financing ideas.

Lower rates worrisome

Chen Guoqiang of the Peking University said the Tianjin model is a good start, but the lower return rate of the affordable housing investment fund is still a major concern of analysts.

Yi Xianrong, a researcher of the Chinese Academy of Social Sciences (CASS) said, "who would prefer to invest the affordable housing investment fund remains a big question, especially when the real estate market has recovered rapidly since the financial turmoil, and because the return rate of low-income housing construction is relatively lower."

Under normal conditions, the return rate of a private equity fund is much higher than bank interest rates, and it is too difficult to judge the return rates of the Tianjin fund because it's still too new, said Yang Guohua, an analyst from Hong Yuan Securities.

"It's expected the residents will move into the new units in 2012," said an employee who asked to remain anonymous from the Tianjin development group. "The price will be much lower," he added, 搅拌机 現金化 seoサービス CFD