State adds $1.6b to low-cost home rebuilding

China has allocated new investment to support shantytown infrastructure construction, a senior Housing and Urban-Rural Development Ministry official said on Friday, in a move expected to inject new vitality into the slumping property and construction industries.

Another 10 billion yuan ($1.6 billion) was earmarked for infrastructure construction in shantytown renovation at a meeting of the State Council, China's cabinet, on Wednesday, said Housing and Urban-Rural Development Vice-Minister Wang Ning on Friday in Beijing.

The government's support for shantytown renovation has been relatively aggressive this year, Wang said. "Within such an economic situation, it is not easy for the central government to set aside so much money for this sector."

China has dedicated 149.4 billion yuan from the central budget to shantytown rebuilding this year, he said, and also put 36.5 billion yuan toward renovating dilapidated rural housing.

Shantytown renovation accounts for a large portion of the national budgeted funds this year, which is 477.6 billion yuan, the central government said in March.

Zhang Hanya, president of the Investment Association of China, said the new funding is good news for property companies because some of them also provide shantytown renovation service to local governments.

"Financial support from the central government is limited, and mainly aims at spurring local investment," said Zhang.

In the first five months of this year, the amount of land purchased for real estate development fell by 31 percent and new construction starts slumped by 16 percent, according to the National Bureau of Statistics.

On Wednesday, the State Council also decided to set an action plan in motion to rebuild 18 million low-cost housing units in shantytowns and renovate dilapidated rural houses for 10.6 million households from this year to 2017.

Central and local government budgets are the two major financing sources for these projects. The central government has urged regions to make funds available to support local governments' budgeting for shantytown renovation.

For cities with budget shortfalls, provincial governments can offer help by issuing local government bonds on their behalf, said Wang. Many local governments are under great financial pressure as their income from land sales continues to shrink.

Meanwhile, the original financing platforms can also go through market-oriented restructuring to play a role in shantytown rebuilding projects, Wang said.

Also, the government is promoting public-private partnerships (contractual partnerships between public and private-sector organizations) and hopes this will be a major way to attract investment.