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Investment approval tightened

By Han Xiao (China Daily)
Updated: 2007-06-08 08:17

A stricter approval process will be applied to foreign investment into China's real estate market, especially in the high-end sector, according to a notice jointly released by the country's top two regulators.

According to the notice, all foreign real estate companies that have been approved by the local government must be put on the record of theMinistry of Commerce(MOFCOM) in the future.

The notice, published by the MOFCOM and the State Administration of Foreign Exchange (SAFE), will give the MOFCOM the final say in deciding whether to approve a project. The notice will also give the MOFCOM a better idea of the scope in China's property market, experts say.

Insiders said the note was sent to the MOFCOM and the SAFE's local bureaus last month.

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The notice also imposes a very strict threshold on foreign investors' application to set up real estate companies. Only those who have obtained land-use rights and own property can establish real estate firms.

The notice asks local bureaus to stop the practice of allowing foreign investors to take over local project companies.

Despite the government's dampen measures to slow the flow of foreign capital into the country's property market, the move is unlikely to restraining the interest of overseas investors, according to Robert Lie,CEOof ING Real Estate Investment Management Asia.

"Foreign investors are attracted to the strong growth prospects of China's real estate market. The opportunity to develop new real estate to cater to the rapid growth of increasingly affluent urban populations is a compelling one," he said.

Lie said that China is becoming an increasingly important part of the global real estate market.

"As it grows and becomes more transparent, China's real estate market will become an essential part of an international investor's portfolio," he added.

Lie also noted that despite rising foreign investment, China's property market remains mainly domestic-driven, with 95 percent of total investment coming from local parties.

According to Violet Lee, managing director of GuocoLand China, the government's restrictive attitude toward foreign investment in property projects has a limited impact on long-term foreign investors.

"The move only drove away speculative investors, which is good news for long-term investors," said Lee, adding that the company's accelerated expansion is an expression of this confidence.