No change for foreign property investment laws in Shanghai

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Shanghai is not loosening rules on foreign investors buying property according to officials at the Shanghai municipal housing land & resources administration bureau.  Rumors had been swirling after the bureau posted a notice that said foreign nationals, legal representatives and other organizations are qualified to participate in land bids.

The local media jumped on this and began reporting that in the past, only foreign companies that had registered firms on the Chinese mainland were qualified. As the China Daily reports, this is not true:

Foreign nationals, legal representatives and organizations have been qualified to take part in land bidding since the No 2 land tendering notice of 2006 was released last October, while the No 1 notice of 2006 defined foreign investors as those who had been registered as living in China for at least one year.

“I have checked with relevant officials, and they are not aware of any noticeable changes from previous notices,” said a spokeswoman from the bureau who did not want to be named.

The report goes on to mention that the latest notice does include some changes. For example, deposits for land bidding can now not only be paid with RMB, but also US dollars, Hong Kong dollars, Japanese yen and euros, payable to the municipal land bureau. This was not the case in the past. 

According to a study conducted by the World Bank, it takes three steps and 32 days to conclude property transactions in China. The same study found that the average cost to register a property is 3.1 percent of the overall property value. At first glance, this may seem relatively attractive to many investors. However, the consistent message from everyone involved in the market is do your due diligence before diving into any investment deal–as should always be the case in China.

The due diligence process starts when you survey the target property and ends when all checks with the relevant authorities and documentation have been completed. The process can be long and arduous, not least because of language and a need to understand the local system. Therefore, you are very strongly recommended to enlist the assistance of able professionals, whether in the field of real estate, legal services or even consultancies such as our own to help facilitate your investment decision and process.

For more information about foreign investment in China’s property market, check out the October 2006 issue of China Briefing.

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