The central government is expected to set tougher eligibility criteria for purchase of low-cost houses to solve the rising housing pressure among low-income earners and to cool down the overheating real-estate sector, sources close to the Ministry of Construction (MOC) recently revealed.

"The ministry, along with the State Development and Reform Commission, plans to release a document which will adopt stricter requirements for those who want to buy low-cost houses, which are built for low-income earners," China Real Estate newspaper quoted a source from the MOC as saying.

As a result, only some 20 per cent of urban citizens will qualify to buy such houses, a steep decline from current 70 to 80 per cent.

The revision is believed to fend off criticism that the existing policy allows a number of medium, and even high, income earners to buy the indirectly-subsidized housing and negating the original purpose of the policy.

"Have you seen my neighbours' private cars?" asked 27-year-old Fu, pointing to rows of expensive cars parked near his home. "I wonder how their owners can afford to buy these luxury cars if they are low-income earners like me."

Fu lives in the Tiantongyuan residential complex in northern Beijing, where houses are categorized as low-cost and sold to low- and medium-income earners at 2,650 yuan (US$321) per square metre.

"Under the new policy, the State will selectively approve the construction of units of over 120 square metres," said an MOC official, who declined to be named.

Houses under 120 square metres are affordable and favoured among the low-income group, latest surveys show.

In addition, the move is expected to rein in excessive investment in the current bullish real-estate sector, with experts fearing a speculative bubble similar to the one in the early 1990s.

"Although the overall outlook of the national economy is good, some sectors do report symptoms of 'overheated' growth," said Hu Angang, a renowned economist with the Chinese Academy of Social Sciences, pointing out that real estate is one of them.

The People's Bank of China (PBOC), the central bank, recently imposed stricter limits on housing credit to minimize financial risks in the real-estate sector.

Despite the SARS (severe acute respiratory syndrome) outbreak, investment in real estate soared by 34.1 per cent year on year to notch up 469.8 billion yuan (US$ 56.9 billion) from January to July.

(China Daily August 22, 2003)