Shang­hai strives to de­velop rental mar­ket

China Daily (Hong Kong) - - BUSINESS - By WU YIYAO in Shang­hai

Two parcels of land in Shang­hai are be­ing leased for “rental res­i­den­tial projects”, the first of its kind in the city, as the me­trop­o­lis en­cour­ages the de­vel­op­ment of a va­ri­ety of res­i­den­tial prop­er­ties.

Shang­hai’s land and plan­ning au­thor­i­ties said on Tues­day evening that two parcels, 65,000 square me­ters in Pudong dis­trict’s Zhang jiang science park area and 28,500 square me­ters in Jiad­ing dis­trict, would be leased for 70 years, and those who ac­quire the land parcels at later auc­tions must en­sure that the pro- jects de­vel­oped must be rented res­i­den­tial prop­er­ties.

Lu Wenxi, a Shang­hai-based Cen­taline Prop­erty an­a­lyst, said that “rental res­i­den­tial prop­erty” is a brand-new pur­pose for land use emerg­ing amid a fast chang­ing res­i­den­tial prop­erty mar­ket.

“Since the be­gin­ning of 2017, Shang­hai has been mak­ing a se­ries of moves to en­cour­age the de­vel­op­ment of the rental mar­ket to im­prove ef­fi­cient and rea­son­able use of land. Leas­ing land parcels for rental pur­poses only is a di­rect move to sup­port rental mar­ket growth and a ges­ture to guide the mar­ket to con­sider other op­tions of res­i­den­tial de­vel­op­ment,” said Lu.

Ac­cord­ing to Shang­hai’s land plan­ning au­thor­i­ties, pri­or­ity is given to bidders aim­ing to de­velop projects for rental projects for highly skilled staff mov­ing from other lo­ca­tions to Shang­hai, such as lead­ing sci­en­tists and ex­perts. Rental costs shall not be higher than the av­er­age level of sim­i­lar prop­er­ties, and can be ad­justed in ac­cor­dance with mar­ket price fluc­tu­a­tions.

Sev­eral prov­inces across China have launched poli­cies en­cour­ag­ing the de­vel­op­ment of rental prop­er­ties, in­clud­ing al­low­ing de­vel­op­ers to trans­form land use from com­mer­cial to rental res­i­den­tial since the be­gin­ning of 2017, in­clud­ing Guang­dong, Guizhou and Jiangxi.

So far, 10 of the top 30 de­vel­op­ers in China have tapped into the rental mar­ket across China, ac­cord­ing to data from Shang­hai-based CRIC, a real es­tate in­for­ma­tion ser­vices provider.

“En­ter­ing the rental mar­ket re­quires strong cash flow man­age­ment ca­pac­i­ties as projects work on long-term sta­ble and steady in­come, and big play­ers are al­ready al­lo­cat­ing more re­sources in this niche mar­ket. China will see more rental projects in the near fu­ture,” said a CRIC re­search note.

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