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July 17, 2009

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Experts urge the city to better monitor housing developers

SHANGHAI'S leading engineering and legal experts are urging the government to work out more stringent supervision of local housing developers, who are widely considered to contract projects to bidders with the lowest construction price rather than their technical ability.

The expert team, including a dozen of the city's top engineering designers and lawyers, has been visiting some local construction sites with other government construction safety inspectors since the June 27 building collapse in Minhang District. The investigation is focusing on loopholes and issues with the progress of the city's current construction projects and hopes to suggest improvements.

Slack supervision of housing project developers has been the main cause of most complaints raised by the engineering experts.

They all urged the government to promptly increase supervision of housing project developers. Compared to the constructor and quality supervisors, developer are loosely regulated by construction industry rules, the experts told some government officials in a session yesterday.

Professor Lu Xilin, director of Tongji University's Structural Engineering and Disaster Reduction Institute, said the questionable bidding practice has become prevalent among local developers in the booming housing market of recent years.

The industry rules require developers to choose builders based on technical competence as well as cost.

"The reality is most of the housing projects are granted by the developers to construction bidders offering the lowest or close to the lowest price. The concern is barely connected to the constructor's technical expertise," Lu told Shanghai Daily.

In contrast, the government always releases land to the developer that offers the highest bid.

"After getting the land, lowering the construction cost as much as possible becomes the key concern of a developer when it starts looking for a constructor," Lu said.

"Based on a methodology suggested by government authority, there's an official guideline construction cost for each project. However, the fact is the construction price of settled construction contracts is always much lower than the guideline cost."

Accordingly, the builders then try to minimize their building costs, struggling to make a slim profit from their low quote.

Safety issues such as speeding up construction and using cheaper materials arise from the vicious circle of profit seeking.

Shanghai Bar Association President Liu Zhengdong said "quality issues would be unavoidable if nothing is done to curb the developers' highly profit-driven practice in choosing the project constructor."

The lawyer also suggested that laws should be made to order mandatory housing damage insurance be paid on each apartment sale to better protect the property owners in the long run.

"Now we have every reason to believe that many developers would dismiss claims years after selling the apartments. Housing insurance should be in place to protect owners from losses resulting from houses falling apart and future damage when the developer is dismissed or unable to pay compensations," Liu said in light of the recent building collapse.

A government-run housing-damage fund, based on a special sales tax paid by the developers, is also an alternative, Liu suggested.

The engineers also suggested that the government check all construction and infrastructure projects and earmark those with the greatest engineering difficulties to make them the center of supervising efforts.


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