New Shanghai property rules impact on market prices

A new Shanghai local rule came into effect on 10 April 2017, and will be effective until 31 March 2022. It is one of the most important of Shanghai local rules governing its booming real estate market.

A new set of requirements has been introduced on acquiring, developing, holding and disposing of real estate projects in Shanghai, which will have a large impact on both domestic and foreign developers and investors, which currently have, or are going to make, investments in Shanghai.

Going forward, real estate developers will more often see mandatory terms on the long-term holding of commercial and office buildings directly incorporated in land grant contracts, including the minimum term and percentage that they should hold for real properties before future disposal. While it has not been uncommon to see similar requirements on public auction notices recently, the new rules have set up a mechanism among various governmental departments, requiring the land bureau to work with other government authorities to determine whether land grant contracts should have such long-term holding clauses, and how such clauses should be drafted on a case-by-case basis before putting up public auction notices. Land grant contracts with a long-term holding clause will become the norm in Shanghai.

David Li Binhui is a partner at AllBright Law Offices in Shanghai