Insider bares real estate profit scam
By Wang Xiang |
July 3, 2010, Saturday
|
Print Edition
Print Edition
A BUSINESS insider has blown the whistle on how he made a 10,000 percent profit in five years with the help of local government in China's red-hot housing market.
The real estate player in a south China city would only give his surname Liu. He told China Youth Daily yesterday that he earned more than 200 million yuan (US$29.54 million) from a parcel of land he bought five years ago with only 2 million yuan.
Liu said developers had several secret ways to make profits; the most common was to increase the floor area ratio so that they could sell more apartments than required by the land deal contract.
He said local governments seldom stop them because they are "awesome" tax payers.
In the deal five years ago, Liu built about 100 percent more than the contract allowed as authorities failed to keep a check on him for irregularities, the report said.
Some other details were deliberately left out in the contract, Liu said.
He built more than 3,000 square meters of shops in the residential complex. The shops could be sold at twice the price of residential apartments and technically it was legal.
He told the newspaper that developers don't need to invest any money of their own because of the house presales.
They use the buyers' money to build their houses and still make a huge profit from it.
Liu said the local government was to blame as there was minimum regulation of real estate companies.
Some governments even helped to mark up the housing price by issuing various favorable policies, for instance, by giving permanent residential rights to house buyers.
China Central Television reported in May that 57 bureau-level officials, including some heads of local governments, had been disciplined for their role in property-related scandals by the end of April.
Nationwide, 5,241 officials have been punished for similar wrongdoings. In most cases, offenders took bribes from property developers and abused their power to secure favorable deals for developers, CCTV said.
Liu told the newspaper that one third of the cost in the real estate business was set aside for officials. That was the fee to make connections, which was worthwhile, he said.
The real estate player in a south China city would only give his surname Liu. He told China Youth Daily yesterday that he earned more than 200 million yuan (US$29.54 million) from a parcel of land he bought five years ago with only 2 million yuan.
Liu said developers had several secret ways to make profits; the most common was to increase the floor area ratio so that they could sell more apartments than required by the land deal contract.
He said local governments seldom stop them because they are "awesome" tax payers.
In the deal five years ago, Liu built about 100 percent more than the contract allowed as authorities failed to keep a check on him for irregularities, the report said.
Some other details were deliberately left out in the contract, Liu said.
He built more than 3,000 square meters of shops in the residential complex. The shops could be sold at twice the price of residential apartments and technically it was legal.
He told the newspaper that developers don't need to invest any money of their own because of the house presales.
They use the buyers' money to build their houses and still make a huge profit from it.
Liu said the local government was to blame as there was minimum regulation of real estate companies.
Some governments even helped to mark up the housing price by issuing various favorable policies, for instance, by giving permanent residential rights to house buyers.
China Central Television reported in May that 57 bureau-level officials, including some heads of local governments, had been disciplined for their role in property-related scandals by the end of April.
Nationwide, 5,241 officials have been punished for similar wrongdoings. In most cases, offenders took bribes from property developers and abused their power to secure favorable deals for developers, CCTV said.
Liu told the newspaper that one third of the cost in the real estate business was set aside for officials. That was the fee to make connections, which was worthwhile, he said.
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