In 2010, when I travelled across China, the common dinner table conversation was housing and, given the sky-rocketing prices in mid-2009, who is buying what, when and how. Unlike a decade or two ago, when the reticent Chinese, still caught between socialism and capitalism, hardly ventured out to wash dirty linen in public, conversation steered easily into the grey nooks of everyday China?who has one, two or three properties; who is going to spend the rest of his life paying back the hefty bank loan; of the new influx of migrants buying properties in tier-1 cities, sometimes a precondition for the transfer of their rural hukou (household registration or residency permit) into urban hukou; and who has been wily enough to sub-let his public housing for a few hundred yuan or more and, instead, moved into ostensibly, a newer, nicer apartment. More than a decade ago, in 1998, China discontinued the old paternal practice of allocating public housing for members (employees) of the state danwei (work-unit).

Staying in a rented property may be widely popular in India, but in China, it is somewhat ?demeaning?, socially linked to a ?loss of face?. ?Dwellers must own their dwellings.? This is becoming the pre-condition for marriage and, thus, new beginnings. If you look beyond the gloss of cities?beyond the spanking new blocks of impressive sky-rise, the construction frenzy of dirt and dust, hoardings of ?Urban upgrading! Life upgrading!? splattered across provincial cities?it is hard not to notice the large swathes of unoccupied empty apartments, which, according to a Chinese daily (Southern Metropolitan Daily, June 2010), reaches 20% in new real estate projects in Guangzhou, and even higher in Shanghai and Beijing.

Two contrasting scenarios have unfolded; both of unoccupied houses (speculators, multiple investments) and unaffordability, as residential prices relative to per capita income is very high.

Speaking of unoccupied space, The Telegraph, London, quoted Corriente Advisors (American hedge fund) last week saying that China has an excess of 3.3 bn sq m space. According to an estimate, 87% of houses in urban China are privately owned, but not all privately owned houses are owner occupied?the rich in China, like the rich in India, are increasingly choosing to have multiple properties for investment or speculation. Unoccupied space has led to the phenomenon of ghost towns, now no accident in China. The recent reportage on one such ghost town, Kangbashi New Area, 15 miles south of Ordos city in Inner Mongolia, by NYT, Al Jazeera TV and even (surprisingly) China Daily is a glaring example. Another instance is the brand new creation of the satellite city of Chenggong, 30 km (18 miles) from capital Kunming of Yunnan province, built on 10 previously existing townships on the outskirts, where the trickle of people has failed to turn into a flood.

And speaking of unaffordability, according to an estimate of two National University of Singapore researchers (Lu Ding and Huang Yanjie, July 2010), in tier-1 cities, housing price per sq m amounts to 50-100% of average annual income. Recent data shows that there is an increased supply of housing area per person in China from an average of 6.5-7.5 sq m in 1990 to 30-34 sq m in 2009, which portends a better lifestyle, but the irony is that much of it is unaffordable.

Real estate industry accounted for a small part of China?s GDP in the 1990?s but has become a pillar industry today, a move promoted by the State Council?s policy prescriptions, beginning in 2003.

The downside is that developers, speculators and banks have joined the fray, fuelling soaring prices. A new class of what the Chinese call diwangs (land kings) has come into being. Political scientist Minxin Pei, who has chronicled the dark side of China?s rise, has noted that half of the 100 richest individuals in China on the Forbes 2004 list were real estate tycoons, a scenario markedly different from India.

China?s real estate bubble is in part due to the increased phenomenon of the last decade of local governments relying on land-based fiscal revenue (tudi caizheng) for meeting a third of their budgetary needs. All land in China is state land, the citizens have user rights, not ownership rights (as is the case in India). User rights range typically from 70 years for residential use and 40-50 years for commercial or industrial use. The nexus between local government and developers, a phenomenon not alien in India, has swallowed numerous villages?a phenomenon that an academic, Lu Duanfang, calls the ?new land enclosure movement?.

The NYT has reported that state banks made a record $1.4 trillion in loans in 2009 but allegedly this was diverted into the property market, leading to soaring prices and land bids. It also suggests that state-owned companies are also jumping into the fray, and are outbidding private developers at land auctions in the last year. Banks are surely at risk?academics Lu and Huang cite official documents to highlight the magnitude of the problem?in April 2010, total housing mortgage loans reached 5.7 trillion yuan ($900 billion) or 13.1% of total loans (43.3 trillion yuan or $6.6 trillion) held by financial institutions in China.

Beijing itself is not oblivious of the fact that its economic miracle is going hand in hand with burgeoning non-performing loans. Measures such as ?New Deal in Housing Policy? (fangdichan xinzheng) have been implemented since December 2009 to cool the overheated property market. This includes mortgage restrictions, curbs on purchase quotas, regulations to prevent what we in India call benami transactions, as well as tighten restrictions on real estate developer and property taxes, all in a span of three months (March-June 2010). New experiments such as low-income housing projects in Guangzhou province are beginning to incubate.

China ended the Year of the Tiger on a high GDP growth of 10.3%, stoking further fears of a property bubble. Hopefully, the policies will work to rein in the bubble before it bursts. If not, the consequences for China and the rest of the world will be ominous.

The author is a Singapore based sinologist and a visiting fellow, Institute of Chinese Studies, Delhi. These are her personal views