The floating palace in Dongshan Bay in Shenzhen, Guangdong province.

A luxury villa floating on the sea and built at a cost of almost 100 million yuan ($15 million) may be demolished because its developer did not obtain the correct building permit.

However, the owner, Guo Kuizhang, a successful businessman in the commercial real estate development industry, said the villa is legal as he produced documents during a press briefing yesterday.

"We have the approval from the oceanic administration of Guangdong to develop a high-end oceanic entertainment project," Guo said. "Because it's new and there were no related laws, the administration allowed us to take it on as a pilot in 2008."

Guo started building the villa, with a Southeast Asia architectural style, in 2003 on fish rafts in Dongshan Bay at Nan'ao, in eastern Shenzhen, more than 50 km away from downtown. It was further expanded to cover a sea area of more than 3,000 sq m in mid-2004 and soon earned a reputation as the "palace on the sea".

Sources close to the owner said the floating villa is held in place by 39 anchors, each weighing 1,000 kg, and supported by more than 3,000 foam cushions, which allow it to stay on the sea like an island regardless of the ebb and flow of the tide.

All visitors to the villa are by invitation only. Some have written online about its stunning luxury, including expensive furnishing, numerous antiques and a small horse-breeding farm.

But the oceanic supervision authority in Longgang district insisted, after repeated verification, that the floating palace on the sea was illegal because the developer did not obtain a permit to develop the sea area.