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Chinese Government policies on real estate sector (Supplement)

August 5th, 2008 Michael McDonough

This is a working list of Chinese government policies aimed at stemming growth in the Chinese real estate sector. Please feel free to comment if there is something I am missing. A major source for this was E-House’s annual report.

The following regulations were put in place in 2003:

  • Real estate developers are required to internally finance 35% of the total projected capital outlays for new developments vs. 20% previously.
  • Monthly housing expenses, which include mortgage payments and property service fees, cannot exceed 50% of the borrowers’ monthly income. Additionally, borrowers’ total debt servicing payments cannot exceed 55% of total income.
  • The government also tightened regulations around mortgage lending and restricted the approval of areas for new developments.


The following additional regulations were put in place in 2006:

  • 70% of land approved for residential development for any year must be used to develop low to medium and small to medium sized unites and low cost rental policies.
  • 70% of any construction which commenced on or after June 1st 2006 within each city or county consists of units with floor areas of less than 90 square meters.
  • The minimum down payment for the purchase of any property over 90sqm was increase to 30% of the purchase price vs. 20%.
  • A business tax was put in place for re-selling properties held for less than 5 years.


The following additional regulations were put in place in 2007:

  • Down payments for first time home owners buying properties larger than 90sqm were increase to 30% from 20%.
  • Minimum down payment for second-time home owners were increased to 40% and the minimum home mortgage rate was set at 110% of the benchmark index.
  • On the commercial real estate front, banks are not permitted to finance purchases of pre-sold properties, minimum down payment was increased to 50%, minimum interest rate of 110% of benchmark, and loans can be for no more than 10 years. At the same time, banks are permitted some flexibility based on its own risk assessments.
  • Minimum down payments for dual listed residential/commercial properties were increased to 45%.


The following additional regulations were put in place in December 2007:

  • The National Development and Reform Commission and the Ministry of Commerce issued a new regulation, effective Dec 1, 2007, which placed real estate brokers and agencies in a restricted category of foreign investment industries.
  • Credit curbs were put in place to cap total lending for 2008 at RMB3.6trn, matching the previous year’s level.
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