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Pricey land plot in northeastern Shanghai

The city's northeastern New Jiangwan Town caught public attention again today after a residential plot in the area fetched a price that went beyond expectations of most industry analysts.

Rongxin(Fujian)Investment Group beat six rival bidders when it agreed to pay 3.155 billion yuan (US$472 million), or a premium of 51 percent to the reserve price, for the 38,900-square-meter housing parcel in Yangpu District.

The bid was equivalent to around 52,840 yuan per square meter of gross floor area. But the actual GFA price for the saleable area should exceed 90,000 yuan per square meter since only about 60 percent of homes built on the site could be released to the open market under government requirements.

"Despite a relatively low premium, this plot, the 10th of its kind ever released in New Jiangwan Town, actually came with very harsh terms, making it an extremely costly piece and a big challenge for the developer," said Lu Qilin, director of research at Shanghai Homelink Real Estate Agency Co.

For instance, at least 25 percent of the homes built on this site should be handled over to the government as affordable housing while the developer should hold another 15 percent for leasing purpose only. Moreover, small- and medium-sized units should account for 80 percent of the total, according to government documents.

Based on its actual GFA price, Rongxin needs to sell homes for around 130,000 yuan per square meter in order to make fair profit out of the project, according to forecast by Shanghai Centaline Property Consultants Co.

In comparison, new homes in the area were sold for around 55,500 yuan per square meter during the first six months of this year, according to Homelink data.

The last time a residential plot was sold in the area was in November 2015, when Cinda Real Estate Co paid 7.3 billion yuan for a 132,000-square-meter parcel, or an average GFA price of 49,152 yuan per square meter. It was then the biggest residential land deal of the year in Shanghai.

A newly emerging high-end residential neighborhood in Shanghai, New Jiangwan Town first released a housing plot for public auction in early 2005 when a 176,800-square-meter site fetched an average GFA price of 5,617 yuan per square meter.


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