China is expected to adopt new housing policies by the end of the month to favor middle- and low-income urban residents, officials and insiders said over the weekend.

One important adjustment is to divide current affordable apartments into two types: those for sale and those for rent. This will create the backbone of the nation's housing guarantee system in the future, said an official with the Ministry of Construction, who declined to be identified.

Different from past policies, cities will be encouraged to construct and lease out "low-cost housing" for low-income earners. Moreover, local governments will provide rental subsidies.

These measures are the latest steps towards regulating the real estate market.

On May 29, nine cabinet departments jointly issued an eight-article announcement to curb property price hikes in many cities, reports said.

"Cities at all levels must work out concrete plans on housing construction before the end of September," it said.

"Because China is a populous nation, it is unrealistic to be able to help every person purchase an apartment," said Fang Mingli, a real estate entrepreneur in Beijing.

By building low-cost houses, China hopes to tackle the problem of the large-number of urban residents who cannot afford to buy a new house, he noted.

One controversial issue for real estate developers and insiders is that small apartments no bigger than 90 square meters must now account for 70 percent of new homes being built.

"Low-priced apartments are welcomed by the majority who fall under the system of social resources distribution," said Meng Xiaosu, who is chairman of China Real Estate Development (Group). But "the requirement for smaller apartments can present a problem."

Currently, the proportion of investment in economically affordable housing only accounts for five percent of the total, which is far short of the increasing demand for new houses from middle- and low-income families, Meng said.

"The ideal proportion of economically affordable apartments in China's real estate market should surpass 30 percent," he suggested.

(China Daily September 18, 2006)