Singapore media Lianhe Zaobao reported on the 12th that China has begun to resolve the problem of expiring land use rights.

According to the article, the remaining period of land use rights is shortening for many commercial properties in China. On the other hand, there are no clear provisions regarding whether they can be renewed after expiration, and (if they can) the conditions, such as costs. If owners cannot renew, there is a possibility that they will have to return the land to the local government. Due to this problem, some transactions are on hold, and investors face the risk of suffering huge losses.

Chen Jiahui, head of Greater China for U.S. real estate giant Cushman & Wakefield, estimates that non-residential properties with a remaining land use rights period of 20 years or less (where more than half of the usage period has elapsed) currently amount to 1 trillion yuan (approximately 23.6 trillion yen).

According to insiders, as the remaining period is increasingly shortening, multiple developers are facing difficulties in selling some of their assets. In some major Chinese cities, the value of office buildings has fallen by more than 40% from their peak, and the cumulative debt defaults of real estate developers are said to amount to approximately 130 billion dollars (approximately 20 trillion yen).

Chinese authorities are also beginning to pay attention to this situation. On July 31, the Shanghai Municipal Planning and Natural Resources Bureau issued the 'Shanghai Industrial and Commercial Project Land Use Rights Renewal Business Guidance Opinions (Trial)'. Following Guangzhou, Guangdong Province, it became the second Tier 1 city (major city) to systematically introduce land use rights renewal policies for industrial and commercial land.

Such measures, it is said, could increase policy transparency in the real estate market, clarify the direction of a market that continues to seek its bottom, enhance investor confidence, and help avoid a situation where the value of held assets becomes zero due to the expiration of land use rights. (Translated and edited by Kitada)