China has recently established a new Bureau of Real Estate Registration as part of its effort to enhance land management regulations. The bureau is charged with drafting and enforcing regulations on land management and property registration, resolving land disputes, and issuing certificates for forest land and island use. The creation of this institution complements draft legislation on real estate registration and a national property audit launched by the National Audit Office under the direction of the cabinet to enhance property rights and reduce corruption associated with land sales.
The Bureau of Real Estate Registration will roll out a national system of real estate registration pending final approval of a draft proposal circulated by the State Council. The real estate registration system will not be transparent to the public, but will be visible to government officials who need the information for legal and financial matters. This will include the land, public security, civil affairs, tax, business, finance, audit, statistics and other departments. According to the draft legislation, the system will combine data submitted at the national, provincial, municipal, and county levels. Real property, including collectively owned land, homes and buildings, forests, land including farmland and grasslands, construction land use rights, general land use rights, water use rights, easement, mortgages, and other real estate rights will be registered.
The real estate registration system will allow government departments to share information on property ownership, and is a step toward setting up a property tax. Proper real estate registration will also allow leaders to monitor registration for potential corruption, to better understand property rights grievances, and to implement a property tax in the future. A registration system is expected to be up and running in 2014, and fully operational by 2017. Until this point, a decentralized registration system has reduced the ability of property owners to sell and purchase properties and resulted in weak oversight of property rights enforcement. Corruption investigations have been more onerous, as officials are able to own more than one property registered on different local real estate systems.
A national real estate registry would have greatly simplified the present task of the National Audit Office, which has just launched a national investigation into corruption in the property sector. Under current conditions, officials have been easily able to take rural residents’ land to increase local government revenue and also to use as collateral against loans taken out by local government financing vehicles. Some officials have also used proceeds from bribery or embezzlement to purchase properties. Both of these types of practices will be under scrutiny in the ongoing anti-corruption campaign.
The real estate registration system is expected to be a key tool in estimating and enforcing property taxes. Currently, the National People’s Congress is working on legislation to implement property taxes, which may be put in place by 2016. The nationally legislated property tax will likely be intended to tax both housing and land – aiming a housing tax at homeowners and a land tax at property developers. The property tax is hoped to provide additional revenue to local governments already short on income.
A pilot program for property taxes levied on housing in Shanghai and Chongqing was initiated in 2011, but expansion of this program has been stalled in order to focus on generating national property tax legislation. The pilot programs have been criticized for failing to slow down a heady increase in property prices. However, it was noted that the pilot programs had limited impact in slowing the property market due to restrictions and very low tax rates.
While there no guarantee that the real estate registration system will stop the practice of insufficiently compensated land takings, the lure of property tax revenue, if it is large enough, may wean local governments away from one-time land sales in favor of ongoing tax income. What is more, the real estate registration system will increase transparency in property rights, which is certainly an improvement over the murkiness of today’s diverse and localized registration platforms. The Bureau of Real Estate Registration and its associated pending regulations therefore show promise, and are key components of the leadership’s reform agenda.