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The standard land price, and compensation amounts

November 2, 2015

konjaku: the compensation Beigao villagers received for their demolished homes was calculated by a formula, which was based, not upon the market value of their property, but on the “standard land price.” The amount of the standard land price, some 60% less than market values in 2010, largely determined the amount of compensation.
The standard land price, also translated as the “benchmark land price” was apparently first established by the government in 1978, in the absence of any other system for appraising land and fixing land prices. Nowadays, it seems to have less influence on the real estate market, but as the following article argues, still a great deal to do with compensation amounts.

Standard Land Price is Readjusted, the period in which revisions are made needs to be shortened



The standard land price is more than just connected to compensation for demolished houses, it is the key determining factor. It determines the amount of compensation, regardless of the market value of the demolished property.
A few days ago, the Beijing city government, for the first time in 12 years, issued a new determination of standard land prices. Compared to 2002, this revision is notable for finer divisions, more accuracy. Types of land use went from 10 categories, to 12. The standard land price average has risen. In the old, center city areas, it can go up to 29980 yuan per square meter.

Efforts were made to revise standard land prices in 2006 and 2010, but public hearings did not bring about results. Since the standard land prices were not revised for a long time, they are far below actual market prices.

For a number of years, and continuing up to the present, when land is levied by the government and houses are demolished, compensation follows the legal formulation of: “(Standard land price xK + standard building price) x the area of the house to be demolished + the house replacement cost. The standard land price is the crucial element in this formula, and carries much more weight than the market price of the property in question, whatever that may be.

In recent years, problems over compensation have been been in the public eye, and the fact that compensation rates are low has increased the intensity of the disputes. One point of issue at the forefront is the failure to adjust the standard land price in a timely fashion. But because setting the standard land price is within the government’s legal authority and power, and setting compensation rates is based upon this determination, those who cry for help that compensation rates are too low, have no recourse. They may feel the compensation amount they are offered is completely irrational, but because the government is within its rights and not overstepping its prerogatives, there is nothing they can do.

In fact, it is not true that there are no stipulations that the government must readjust the standard land price at a certain rate of frequency, or within any set period of time. The Real Estate Code says the standard land price should be decided for a fixed length of time. The National Planning Commission Land Code says the price should be adjusted once every two years, and if market fluctuations show a large amount of movement, it can be adjusted once a year. When Beijing city published its 2002 manual of land prices, it stated there would be a readjustment every two or three years. Now, after a wait of 12 years, there has finally been a readjustment, causing people to sigh.

Therefore in the future, there needs to be improvement, the period between adjustments must be shortened, to bring about a parity with market prices. Since this is already written in the law, the people have a rational basis for an expectation that this will happen.

Writer: A Concerned Person (employed in the law)

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