Chinese property owners are scrambling to address the ticking time bomb that is the soon-to-expire land rights to their homes. Recently, several property deals in Wenzhou, east China's Zhejiang Province, were thrown into disarray after the owners discovered that the local government required them to renew the rights to the land, which had expired after 20 years in March. The government, however, has yet to unveil specific policies on the renewal of the rights.
The news spread around the country and has unsettled many, especially those planning to sell or buy second-hand homes.
The Chinese Government has ownership over all urban land, though in rural areas, land is owned collectively. Urban residents have ownership over the apartments they buy, but they don't own the land under the buildings. The government leases land to developers, and leases can last from 20 to 70 years.
As these rights begin to mature, many owners across China are worrying about the possibility of having to spend a lot of money to extend them. Others believe the renewal should be free of charge, since the Property Law states that when such a lease expires, it is to be extended automatically. Even so, detailed regulations have not been released.
What exactly will happen after more leases reach their expiration dates across the country? What will Chinese people do about their homes? Should the land-use rights be renewed for free for several decades, or should a fee be paid?
A complex issue
Hong Lefeng (Beijing Times): When the government granted land-use rights in Wenzhou in the 1990s, no clear explanation was given on how to extend those rights when they ran out. The Property Law does mention that they should be renewed "automatically," but that doesn't mean "free of charge."
It always seems there is a long time between now and 70 years in the future. As a result, specific measures on how to renew expired land rights are hard to come by. Apart from 20-year leases, a lot of properties are housings for both commercial and residential purposes, whose land rights last only 40 to 50 years. If one were to purchase a second-hand apartment or house, the buyer would be purchasing a property whose land rights lifespan has already been shortened. It is therefore time for the government to produce adequate regulations for the renewal of these land rights.
Of course, this will be a complex process. The government should take into account the economic pressure on those seeking to purchase second-hand properties. As many potential buyers take out mortgages to buy these properties, the fees for extending the land rights should not be too high. A good policy on this matter should help improve people's livelihood, while helping boost the government's revenues.
Bi Shicheng (China Youth Daily): Actually, Wenzhou is not the first city to be perplexed by the issue of land right expiry. Many other cities are also faced with this issue, as leases in more and more cities are reaching their expiration dates. It is therefore high time for the government to come up with effective policies to address this problem in a proper way. The government is expected to give up the revenue it could get from extending land rights; otherwise public dissatisfaction might swell up.
Nowadays, local governments are widely under heavy financial pressure, and some are eager to acquire money from the extension of leases. It is therefore unrealistic to expect them to come up with a good solution.
Most families have not calculated land rights renewal fees into their budgets, but property transactions and mortgages are happening with increasing frequency. Prospective buyers or sellers must take these fees into consideration before setting out to do business.
Li Bin (Finance.cnr.cn): Given the current economic situation, the government will find it hard to decide not to collect land rights renewal fees, especially when this decision is made into a fixed policy. If no fee is collected, it means land use right is indefinite and free. To some extent, it is equal to granting de facto ownership of the land to homeowners. However, as the value of land keeps rising, fees are more and more likely to be collected. The key lies in how to do so without causing friction.
Zhao Xiuchi (China Business Times): Homes are usually most Chinese families' most important assets. Thus, this issue relates to the public's immediate rights and can even affect the country's social harmony and stability.
According to Clause 149 of the Property Law, when a residential land lease expires, it is meant to be extended "automatically." However, no specific regulations have been outlined regarding whether or not the "automatic" extension should involve money.
What should be done when land rights expire? Here are some suggestions. First of all, 70-year land leases should be renewed freely and automatically. This way the public can fully enjoy the benefits of the country's rapid development in the past decades. Since the housing system was reformed in the 1990s, the state has stopped allocating apartments to urban residents. As a result, families have to spend a large proportion of their income purchasing homes. While infrastructure throughout Chinese cities has improved, housing prices have also kept rising.
Urban residents have permanent ownership of their homes, but land use rights can last 70 years at the most—a clear contradiction. Homes are on land, so from this perspective, urban residential land rights should be extended free of charge.
As for land that is leased for less than 70 years, homeowners must pay to extend their leases to the maximum period. The land policy must be fair to every buyer. If these land leases were to be renewed for free, it would be unfair to homeowners who have already paid for the full period in the first place. A standard should be set for fees to be paid based on a property's value at the time it was sold.
Given the current absence of regulations, residents who plan to sell or buy homes have expressed concern. Potential sellers are afraid that the value of their assets will shrink, and potential buyers have become indecisive. This will affect the sound development of the property market. Thus, detailed regulations on residential land rights' automatic renewal must be worked out as soon as possible.
Qiu Baochang (Finance.cnr.cn): In my opinion, the word "automatic" in China's Property Law defines the unconditional extension of land rights. Is it necessary to charge fees for extensions? I think that should depend on the public. To have a place to live in is a basic necessity. The state must try to protect its people's basic right to shelter.
I don't think there should be any charge for the extension. Why? My reason is simple—consider the abolishment of the agriculture tax in 2006. Why was this tax canceled? That was because the economy had developed to an extent where farmers could be liberated from hard labor. If local governments can stop relying on revenue from leasing land and taxing housing property transactions, they will have demonstrated an equal level of socioeconomic progress as in 2006. The free renewal of land rights conforms to the Property Law, the public's basic rights and also their interests.
Copyedited by Bryan Michael Galvan
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