Real Estate Development the Chinese Way

Qiuhong Tang, SWA Group

ULI Fall Meeting, 2011

“The urbanization in China and the high-tech development in the United States will be the two keys to influence the human development in the 21st century.”

Joseph Stiglitz, Nobel Prize Economics Winner

Urban China

The Rapid Metamorphosis

The Rapid MetamorphosisPopulation from being rural to urban

The Industrialization Drive

The Industrialization DriveThe acceleration of urbanization is due above all to a reinforcement of industrialization in China.

The Economic Effects of UrbanizationThe economic spillovers of this urbanization are seen through the explosion of real estate investment as well as the spectacular demand for raw materials.

An Era of Rapid Change

The Historical Changes in Real Estate RegimesPoor use of land, given the lack of a real estate market and any commercial value for land

• Imperial ChinaVery restricted, reserved for an elite group, concentrated in rural areas, very many peasants had no land

• The Republic of China (1911 -1949)Kept private landownership, political instability

• China under Mao (1949 -1976)Overturned private landownership, farming land collectively

The Land Reforms Under Deng XiaopingUrbanization in China is primarily the result of a strong, deliberate public policy since the Deng Xiaoping era

• 1978 the Four Modernizations“Socialist market economy”

• 1982 the Fourth Consititution of the People’s Republic of ChinaA distinction between agriculture land held collectively by peasants and non-agriculture land in urban areas recognized as State property

• 1986 the Land Administration Law (or Land Law)Introduced into China’s legal system the concept of the “right of use” land,The foundation of the major developments of private real estate industry

• 1990 allowed land use rights to be ceded between private individuals and companiesExtended nationwide

• 2007 adopted a general law on propertyStrengthened and completed changes over the preceding 20 yearsImproved the security of real estate transactions

The Emergence of a Real Estate MarketThe introduction of transferable usage rights has stimulated the creation of a real estate market.

• In the early1980s, no property market in China • By 1991, 3700 developers were authorized to operate• In 1998, the abolition of free social housing boosted home buying• The share of real estate in total investment jumped from 4% in the early

1990s to 25% in the first 5 months of 2009.

The Project Development Approvals Process

• the need of protecting agriculture land

• encouraging the urbanization of the population

• the development of a real estate industry

• Provides significant revenues from the sale of usage rights, tax receipts and employment

• Complex procedure, lobby intensely at all levels

Case StudyGubei Pedestrian Promenade, Shanghai,

China

Project Team

Awards

Site Statistics

Special thanks to my colleagues, clients and the ULI Pacific Rim team for their

support and generosity:Fred Allen, Ronald A Altoon, Phyllis Alzamora, Gerdo Aquino, Richard Drobnick, Wei Er, Ying-Yu Hung, Meyer Jeff, Gregory J Karns, Hui-Li

Lee, Sean O’Malley, Tess Pan, Natalie Sandoval, Ronald I Silverman, Jack Wu, Amanda Walter,

Xiaodong Xu, Xiaobo Zhou

Reference: “Urbanization and Real Estate Investment in China”Guillaume Rougier-Brierre/Guillaume Jeannet, 2009“An Overview of Property Development in China”

Brad Herrold/Lovells Beijing, 2008