November 15, Poly Real Estate Group Co. Ltd. (600048.SH) could be hit with a fine of up to RMB 352 million from the Ministry of Land and Resources over a plot of land in Beijing that has been left idle for over a year, the National Business Daily reported on Tuesday.
The plot was acquired by the real estate arm of state-owned China South Industries Group Corp. for RMB 1.76 billion in March 2010, making it one of the most expensive pieces of land in the capital at the time at a price of RMB 30,197 per square meter.
It was supposed to have been developed no later than Oct. 30, 2010.
Poly announced this August that it had bought CSGC’s property development firm in a deal that included the plot of land. The developer now faces a fine of up to RMB 352 billion because the land has been left idle for over a year, the paper said, citing information from the local land reserve center in Beijing.
Under the land ministry’s rules, companies that pay for but fail to develop a plot of land within 1 year of taking control can be fined up to 20% of the transaction price of the plot in question.
Only in cases where the development of land has been delayed by force majeure or the government is a fine not applied, the report said.
Beijing-based lawyer Liu Yanfang told the paper that in the case of Poly, a 20% fine is likely to be applied.
An unnamed person from Poly was cited as saying that the developer hadn’t had time to develop the plot because it was only acquired in August.
Central and local governments have in the past year become more vigilant of idle land because of high residential property prices. In particular, a practice known as land hoarding, where developers buy land and sit on it before flipping it for a profit, effectively pushing up the end price of units for buyers, has been the target of government efforts in this area.
Last August, Shui On Construction and Materials Ltd. was hit with a RMB 5.1 million fine for an idle plot of land it inherited through the acquisition of a Beijing-based developer from Pacific Century Premium Developments Ltd. (0432.HK), one of Hong Kong tycoon Richard Li’s Pacific Century group of companies.