Property reforms will build healthier real estate sector

China unveiled a landmark package of property reforms on Friday, marking a pivotal shift in the development model that has shaped the sector for decades, laying the groundwork for a new phase of stable, sustainable growth.

A common thread runs through the measures: homes should be delivered with greater certainty, buyers’ money should be better protected and sound projects should be given the funding they need. By bringing sales and finance rules into closer alignment, the package offers an institutional safeguard for households and sustained support for the property sector.

At the heart of the changes is a carefully paced reform of the presale system. Rather than applying one model to every city and project, the rules give priority to completed-home sales for projects on newly sold residential land and for developments on previously sold plots that have yet to obtain construction planning permits. Where projects still rely on presales, each building must be structurally topped out before homes can be offered.

Completed-home sales turn a blueprint into something buyers can see and inspect. The promise of a future home makes way for a visible product, narrowing information gaps and encouraging developers to compete through quality, design and service. The reforms guide developers to shift from high-leverage, rapid expansion to prudent, quality-oriented operation, laying a solid foundation for the sector’s long-term healthy development.

Protection also extends to the flow of funds. Down payments, mortgage proceeds and other purchase money must enter supervised accounts. For presold homes, mortgage funds will be released only after project completion has been formally registered, rather than at the earlier topping-out stage. For completed homes, disbursement will follow registration of the sale.

The change makes finance follow construction and delivery. Since lenders are involved in the development cycle, with the latest change, funds can be monitored more closely and risks identified earlier. Together with "handover with certificate", the reform brings a chain of protection extending from the first payment to the receipt of both the keys and the ownership certificate.

Protection for buyers is also reflected in the extension of the maximum mortgage term from 30 to 40 years, the first increase in the national ceiling since 1999. By one estimate, a 1-million-yuan ($148,796) loan at an annual rate of 3 percent would carry a monthly payment of about 3,581 yuan over 40 years, down from 4,216 yuan over 30 years, a reduction of roughly 15 percent.

With the precise loan-term decided, families can gain more room to match repayments with their income and life plans. Lower monthly payments can also help ease the burden on first-time buyers and families seeking better homes.

The package also recognizes that stronger delivery requirements need stable financing for developers. Banks are thus encouraged to distinguish developer-group risks from those of individual projects and place greater weight on a project’s quality, cash flow and prospects. Wider use of bonds, asset-backed securities and real estate investment trusts should direct more capital toward viable projects and the construction of safe, comfortable, green and smart homes.

Viewed together, the package serves dual core purposes. For the industry, it is expected to accelerate the phase-out of the old high-risk, high-circulation development model and advance the construction of a new, sustainable real estate development system centered on "housing is for living in, not for speculation".

For the macroeconomy, the policy stabilizes market expectations, defuses lingering industry risks, coordinates real estate development with financial stability, and helps the sector return to a rational, healthy growth track.