China’s residential common areas spark controversy

By Li Xuanmin Source:Global Times Published: 2018/8/7 22:03:39

Commercial real estate programs under fire


The residential common area, a unique business model in China's real estate market under which the common areas at commercial residential programs are equally shared among property owners as calculated in part of their housing payment, has sparked widespread criticism in recent days, with some saying that the system has become a tool for property developers to mark up sales prices.

The discussion was triggered by an article which claimed that a homebuyer in Wuhan, capital of Central China's Hubei Province, who was supposed to purchase a 125-square-meter new hardbound home, found that he only has 95-square-meters as a teaching area after officially taking over the apartment in July. That translated to a residential common area ratio of 28 percent, and has therefore hiked his housing decoration price by 80,000 yuan ($11,700).

"The residential common area scheme, which has existed since 1998, is in fact a long-time distort in China's housing property market, making homebuyers the slaughter of the lamb as they don't have a say on how the common areas should be decided," Yan Yuejin, a research director at Shanghai-based E-house China R&D Institute, told the Global Times on Tuesday.

Generally, the ratio of the residential common area, which could include aisles, staircases, basements, guardrooms and waste channels, relative to the total housing area is about 0.18 to 0.25. However, due to the lack of regulation on the cap, property developers could easily manipulate the area and pocket extra revenue as high as tens of millions of yuan, Zhang Dawei, an analyst at Centaline, told the Global Times on Tuesday.

A Beijing-based resident surnamed Li, who spent 11.5 million yuan buying a 115-square-meter apartment in Chaoyang district, has been paying a lot for an enlarged residential common area. Li complained to the Global Times on Tuesday that he has paid about 2.5 million yuan for his 25-square-meter residential common area, or 21.7 percent of his housing area.

What angered Li more is that the property management company, without the approval of housing owners like him, has put advertisements on certain residential common areas, such as elevators and aisles.

"We have paid for common areas, should the firm also consider remitting back some of the incomes to us?" he asked.

In a comment published on Monday, the Xinhua News Agency pointed out that the long-existing residential pool area scheme has hurt homebuyers' interest as well as the fairness and justice of the market economy. Observers have also urged relevant authorities to research the possibility of canceling the hidden industry rule.

"With more and more open housing estates entering the market, the government will play a bigger role in public area construction, and in the future, withdrawing residential common areas may become a trend," Zhang said.


Newspaper headline: Residential common area crisis


Posted in: INDUSTRIES

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