Land is definitely scarce in Hong Kong and the government has gone all out to find plots for development. It’s a problem Shenzhen well understands.
While Beijing, Shanghai and Guangzhou each brought no less than 20 million square meters (sqm) of land onto the market during 2009-2012, Shenzhen was only about to come up a quarter of that amount.
Yet unlike Hong Kong, much of Shenzhen is covered by large flat expanses, meaning lower development costs. The only inconvenience there is that most of the city’s vacant plots are occupied by “small properties” — residential buildings erected by the city’s farmers on sites that are supposed to serve non-residential purposes.
These buildings generally do not come with deeds or land titles and the word “small” refers not to the size of the properties but their limited associated property rights.
Before Shenzhen’s rise to one of China’s major urban centers, farmers there used to build these illegal homes around fields to improve their living conditions. When the city began to emerge as a key manufacturing base for electronic products and home appliances, local people found another way to rake in money — by subdividing these homes into flats and renting them to migrant workers working in the nearby factories.
Shenzhen’s Special Zone Daily said the city had more than 400 million sqm of these small properties as of last year.
Like anywhere else in the country, Shenzhen authorities turned a blind eye to the issue until the city expanded rapidly and land became scarce.
Last year the city began to find ways to demolish some of these small properties to make land available for its future needs. But the daunting task won’t bear any fruit if policymakers just adopt a tough stand because many owners are bound to rise up against the move and defend their homes.
So here comes a soft approach. Shenzhen municipal government gazetted at the end of last year a detailed program to legalize some small properties.
The Economic Observer reports that after the owner pays a certain land premium — usually 10 percent of the baseline land price within the area — some of these properties built in the past decade and that conform to structural and fire safety standards will be categorized as legitimate private saleable homes with 70 years of land use rights. This means these properties can be granted full property deeds, sold on the market and used as collateral for bank loans. Other buildings will be confiscated and torn down and the sites rezoned for commercial and industrial use.
Owners of second and third small properties will have to pay a land premium of 20-30 percent of the baseline land price. An owner who refuses to pay the premium will risk having his homes expropriated.
Observers say most owners will be willing to pay the money for the legal status because if their properties are included in Shenzhen’s new town development plans, they can win big with government compensation.
For Shenzhen officials, the “legalization” approach can pave the way for them to include small properties in the well-trodden private home demolition procedures that involve clearance, land resumption and compensation. And, when the land is auctioned, these small properties can be torn down to make room for new developments just like an urban renewal project.
Cadres in other cities are likely to tread the Shenzhen path to convert small properties into private commodity homes and remove them in the name of redevelopment.
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