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China moves to curb building boom

"Land authorities will also step up their after-sale supervision so as to make sure that housing developers are properly using their land or building the right type of houses."

Wang Shiyuan, deputy minister of land and resources

China has banned use of new land for luxury villas and will tighten scrutiny of soaring bank lending, expanding a campaign to rein in a building boom and cool off roaring economic growth, state media reported yesterday.

Measures issued by the Ministry of Land and Resources also call on local officials to supply more land for "smaller and cheaper houses," the Xinhua News Agency and newspapers said. They said the new restrictions took effect on Wednesday.

The central bank will step up scrutiny of bank lending to restrain "excessive investment and loans growth" blamed on "a flood of new construction projects," said news reports, which gave no details of the new controls.

The government will try to increase land supplies for "smaller and cheaper houses," Deputy Minister Wang Shiyuan (王世元) was quoted as saying.

Beijing has issued a series of such measures to restrain economic growth that is roaring ahead at about 10 percent a year. Leaders worry that such rapid growth, and especially heavy spending on new luxury housing, factories and other fixed assets, could spark inflation and leave China's frail banks burdened with bad debts.

Housing is especially sensitive, because a rapid rise in prices and the relocation of farmers and working-class families to make way for new apartments and villas is fueling resentment at the growing gulf between China's rich and poor.

Thousands of protests, some of them violent, have been reported in areas throughout the country over complaints that villagers were paid too little for land seized for redevelopment.

Wang said the government will "comb luxury housing projects across the country to ensure the implementation of the new policy," Xinhua reported.

"Land authorities will also step up their after-sale supervision so as to make sure that housing developers are properly using their land or building the right type of houses," Wang said.

Earlier this week, the government announced steps to restrain soaring housing prices and discourage real estate speculation by raising minimum down payments and tightening lending standards.

Total outstanding bank loans soared to 21.9 trillion yuan (US$2.75 trillion) at the end of March, up 14 percent from the same period last year, the newspaper China Daily said, citing a central bank report released on Wednesday.

The government says housing prices rose by an average of 5.5 percent in the first three months of this year, compared with the same period last year. But in some areas increases are much greater.

New construction has surged ahead while the sales growth rate has tumbled, the China Daily said, indicating that the country could face a growing backlog of unsold properties.

Developers began construction of 170 million square meters of new commercial and residential projects in the first three months of this year, up 22.1 percent from the same period last year, the newspaper said.

But it said housing sales rose by 10.2 percent in the first quarter, half the growth rate in sales in the same period last year.
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