Developing and investing in China’s hotel industry
One measure incorporated under the 2007 PRC Property Rights Law to minimise the risk of corruption in the acquisition of land-use rights was the requirement for the acquisition process to be by way of bidding, auction or quotation.
Land-use rights are capable of being sold, leased or assigned so long as certain conditions are fulfilled — including that the land has been suitably developed pursuant to the land grant contract. From a practical point of view, this is often avoided through the sale of equity in the holding company of the property, rather than by dealing with the property itself.
Beware of ‘allocated land-use rights’. A significant amount of land held by state bodies is deemed to be allocated, theoretically at least, for the public interest and allocated land-use rights cannot be assigned or leased unless they are first converted into granted use rights — which can be a very difficult and uncertain process. Where allocated land-use rights are assigned without approval, the land could be taken back or fines imposed. Banks will not lend money against allocated land…
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