A REVISED housing criteria, designed to help buyers qualify for preferential tax policies on "normal" houses and boost sales of low to mid-class homes, will take effect in Shanghai next month, the local government said yesterday.

A flat within the city's Inner Ring Road costing less than 3.3 million yuan (US$524,642) is to be defined as normal housing, compared with the current cap of 2.45 million yuan.

Between the Inner and Outer Ring roads, the price cap will be 2 million yuan while outside the Outer Ring Road it will be 1.6 million yuan, the city government said. That compared with the present threshold of 1.4 million yuan and 980,000 yuan.

"The current criteria for normal housing was drafted in November 2008, and home prices have increased fairly notably over the past three years. So it is time for the government to make adjustment to keep pace with market change," the local government said. "The revised criteria should allow more homebuyers, particularly end-users, be eligible for preferential tax policies."

A preferential 1.5 percent deed tax on normal home purchase is now levied if the house is the only property owned by a family. The standard rate is 3 percent.

In addition, no business tax is levied when a normal house is sold if the owner holds the property for five years and longer.

"After implementation of the new criteria, more than 60 percent of new homes in Shanghai will be defined as normal housing, compared with less than 20 percent at the moment," said Huang Hetao, a research manager at Century 21 China Real Estate. "At the same time, more than 80 percent of existing houses will be categorized as normal housing."

The new criteria may boost the city's home transactions by at least 20 percent, Huang said.

For buyers and owners of previously used houses, the revised criteria will save them a combined tax cost of between 3 and 5 percent of the house value, according to the company's calculations.

Meanwhile, the city's minimum income and assets threshold for budget home applications is to be raised, also effective in March, the city government said yesterday.

From next month, families of three or more with a monthly disposable income of no more than 5,000 yuan per capita and financial assets of no more than 150,000 yuan per head will qualify for budget home purchases. For single and two-member households, the per capita monthly disposable income and financial asset threshold will be 20 percent higher.