Owing a two-story house would have been impossible for hog raiser Wang Quan without a new policy in Dujiangyan, one of the cities hardest hit by last year's Sichuan earthquake.

Wang's house in Chaping village became too dangerous to live in after the 8-magnitude quake on May 12.

"I wouldn't be able to afford to build such a house in 10 years, but now, without paying anything, I'm living in a villa," Wang says.

When he learned from the village committee in June that the Chengdu municipal government had issued a policy to encourage people from the city to jointly build homes with quake-hit farmers, Wang immediately thought of Zhang Zhonggui.

Zhang, a client of his hog business, had said that he wanted to build a house on Wang's rural housing land in the picturesque Mt Qingcheng area, but the law prohibited him from doing so. Now with the new policy, there is a chance, Wang says.

Under China's current land ownership structure, urban land is owned by the state while rural land is owned by the rural collective. The collective, often a village committee, distributes land-use rights to households. Rural land includes farmland and construction land for housing, enterprises and public structures.

Farmers are allowed to transfer their rural housing land use rights to other members within the rural collective.

"The (new) policy is basically saying that I give up some of my rural housing land to investors who in return will build a new home for me," said Wang. So he contacted Zhang, who agreed to invest 500,000 yuan (US$75,000) right away to build two two-story villas on Wang's 232 square meters of land.

Wang moved into his new house with his wife, daughter and uncle in October. It has a floor area of 132 square meters, with 242 square meters of building area. The house cost Zhang 280,000 yuan.

The rest of Wang's land, or 100 square meters, was given over to Zhang's new country guesthouse that has 170 square meters of building area. Zhang plans to receive tourists visiting Mt Qingcheng.

A complicated matter

But the legal basis of the policy is more complicated than Wang's initial understanding.

Under China's Land Administration Law, rural collective land use rights cannot be sold, transferred or leased for non-rural use.

"This means that the law does not forbid the transfer of rural collective construction land use right for tourism," says Luo Zhaopeng, director of Dujiangyan's Urban and Rural Planning Department.

Since rural housing land use rights can only be transferred within the village collective, the village collective must redesignate the part of the rural housing land agreed by farmers and investors as rural collective construction land, making it transferable for investors, Luo says. Individual investors or companies can use the land to run service businesses such as guesthouses or restaurants.

"Through this process, rural housing land becomes part of collective construction land that can be transferred legally," says Wu Jianling, of Chengdu University's Urban and Rural Development Center.