A two-storey villa would have been impossible for hog raiser Wang Quan without the joint reconstruction policy in Dujiangyan, one of the cities hardest hit by last year's May 12 earthquake. Wang's house in Chaping village became too dangerous to live in after the 8-magnitude quake.

"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 issued a policy which encouraged people from the city to jointly build homes with quake-hit farmers, Wang immediately thought of Zhang Zhonggui.

Zhang, a client of his hoggery 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 existing 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 rural construction land for housing, township enterprises and public structures. Farmers are allowed to transfer their rural housing land use rights to other members within the rural collective.

"The 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 (about US$75,000) right away to build two two-storey villas on Wang's 232 square meters of land.

Wang moved into his new house with his wife, daughter and uncle in October. His house 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 to Zhang's new country guesthouse which has 170 square meters of building area. Zhang plans to receive tourists to Mt. Qingcheng.

But the legal footing behind the policy is more complicated than Wang's initial understanding.

The biggest problem for reconstruction in Dujiangyan is funding, says Luo Zhaopeng, director of the city's Urban and Rural Planning Department.

The homes of about 130,000 rural families were destroyed or damaged in the earthquake in Dujiangyan. About one third of these families need to rebuild and the rest need reinforcement. "Housing reconstruction will cost more than 10 billion yuan," says Luo.

Attracting urban investors will help solve the funding problem, he says. "But there were many policy restrictions when we initiated this practice to help the quake-hit farmers rebuild their homes."

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 or service except property development," Luo says.

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 which can be transferred legally," says Wu Jianling, of Chengdu University's Urban and Rural Development Center.