China's State Council Monday issued a circular that aims to increase the supply of affordable housing in a bid to bring down soaring house prices.

The circular, worked out by the Ministry of Construction, the National Development and Reform Commission and seven other departments, says all local governments must list the building of affordable homes in their 11th Five-year Guidelines.

By the end of September, all municipal authorities must publishplans on the construction of affordable housing, including generalhousing stock, government-subsidized housing and government-owned rental housing for the poor, the circular says.

From June 1, homes smaller than 90 square meters must account for at least 70 percent of the total floor space in any new residential housing projects, it says.

The central government has been trying to rein in soaring property prices since early 2005, but without success.

Prices in major cities continued to rise in the first four months of the year, some of them reporting gains of over 10 percent.

The new circular follows the State Council decision on May 18, in which the government pledged to increase the supply of affordable homes and take other measures to ensure the healthy development of the property market.

The circular includes measures against property speculators, such as imposing the full income tax rate on the sale of homes that have been owned for less than five years.

Mortgage lenders will be required to demand a down payment of at least 30 percent.

The down payment rate will remain 20 percent for those who are buying houses smaller than 90 square meters for their own accommodation.

Under the circular, all developers will have to fund 35 percentof the investment for the development of any project from their own capital before they can seek loans from commercial banks.

Developers shall lose their land if it remains undeveloped for two years after purchase.

The circular also aims to reduce demand, urging local authorities to exercise restraint in demolishing old homes, which is forcing tens of thousands of people on to the market every year.

The circular threatens to be tough with developers engaging in hoarding and other malpractice. Serious offenders shall be fined or even have their licenses revoked, it says.

(Xinhua News Agency May 30, 2006)