Reform could stop developers taking advantage of capacity-sharing system

Yeh Shih-wen, head of the Construction and Planning Agency (CPA), said developers will not be allowed to trade building capacity among each other privately if the reform is adopted.

Local governments will set the prices for building capacity, which developers will have to buy from the government, he added.

Each plot of land is allocated a certain building capacity, which determines how much floor space it can house.

But capacity transfer from one plot to another is allowed. Developers usually exchange the capacity of cheaper plots with more valuable ones where they plan to build upscale units.

One way of obtaining low-price plots is to buy land that is zoned for public facilities and not yet purchased by the government. The value of such land is usually low.

After buying the land, developers will donate it to the government in exchange for its building capacity, which they can sell or transfer to some other projects of their own.

The difference between the original land value and the profits fetched by adding extra capacity to a project is usually huge. The CPA is now trying to stop developers from benefiting from this.

Yeh said the CPA has yet to decide how the capacity pricing will be set, but they will likely be closer to market prices.

Asked if it would send real estate prices up, Yeh said developers may have a lot of excuses to increase prices.

The United Evening News cited a real estate agency as saying that the change could see developers shift the extra costs from the capacity transfer onto homebuyers when demand in the property market is good.

CPA officials said the agency has yet to set a timetable for implementing the reform, which will need only a revision to the enforcement regulations governing building capacity transfer without having to obtain approval from lawmakers, according to the newspaper.

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