China to boost rental housing supply by building on rural land

BEIJING (Reuters) - China will launch pilot programmes in 13 major cities, including Beijing and Shanghai, to build rental housing projects in rural areas as part of efforts to ease a housing supply shortage, the land ministry said on Monday.

That would enable megacities such as the capital Beijing to supply rental homes in its suburban areas where most land is collectively-owned by rural villages, without having to expropriate the land first, analysts said.

Chinese land is divided into urban and rural land regimes, granting ownership rights over urban land to the state while rural land is owned collectively and cannot be bought and sold freely.

The launch of such pilot programmes could mark a significant step towards opening up the country's largely non-existent rural land market, some analysts said.

Under the current law, large-scale development, such as real estate development and factory building, is not permitted on rural land, except where the state has taken ownership of a parcel of land from a village collective, thus turning it into state-owned land.

The move to boost rental supply comes as China contains bubble risks in its hottest markets where an increasing number of people are being priced out of the property market, raising concerns for policymakers who prize stability.

But some experts remain sceptical as the measures come with various conditions, such as requiring the majority of the rural land used to be existing land that has gone through some level of development but remains idle, instead of new land plots.

"In reality these kinds of rural land are very few," said an industry expert at a research institute affiliated with the land ministry, who requested anonymity as he is not authorised to speak to media.

Analysts said local governments who are heavily reliant on land sale revenue may have little incentive to fully implement the rental programme.

"I don't think local governments would actively push this because if rental housing supply rises a lot they might impact the sales market, hurting their land revenue," the industry expert said, stressing that the government-led initiative means local governments have "absolute power" in terms of implementation.

The 13 pilot cities will submit specific implementation plans to the land ministry and housing ministry for approval by the end of November, a statement on the ministry's website said.

The statement did not provide details on targets for the number of rental homes or how much land would be dedicated to the pilot programme, but the rental homes will not be for sale.

(Reporting by Yawen Chen and Se Young Lee; Editing by Jacqueline Wong)