BEIJING — China's top regulators announced a package of real estate reforms on Aug. 28, moving to replace the nation's long-standing pre-sale housing model with a "build first, pay later" system.
The Ministry of Housing, Ministry of Natural Resources, the central bank and financial regulators jointly issued the measures, which aim to encourage developers to sell only finished properties and extend mortgage terms for buyers. The policy formally shifts from "pay first, build later" to protecting consumers by ensuring properties are delivered as completed.
Under China's pre-sale model, prevalent since the 1990s, developers collected significant down payments and full mortgage payments from buyers before construction began. Developers used this upfront cash as interest-free capital to acquire land and fund rapid expansion.
Beijing's 2020 "Three Red Lines" policy imposed strict limits on developer borrowing, cutting financing for highly leveraged firms and leading to widespread construction halts. Major developers including Evergrande defaulted on debts. According to the China Real Estate Association, over 1,660 Chinese real estate developers filed for bankruptcy by the end of 2024.
The crisis left millions of homebuyers making monthly mortgage payments on apartments still under construction. Stalled housing projects spanned over 2.7 billion square feet, affecting an estimated 8 million unfinished homes across the country.
Despite the new reforms, the package offers no immediate relief for homebuyers still servicing mortgages on these unfinished apartments. Analysts said the policy primarily applies to future projects and comes years too late to assist families financially devastated by stalled construction.
One reform extends the maximum term for personal housing loans to 40 years, up from 30 years, aimed at lowering monthly repayments for new buyers.
The shift away from the pre-sale model signals a weakening of land sales as a quick fiscal revenue source for local governments. Beijing has used higher local debt quotas and central transfers as temporary measures, but a durable solution requires creating sustainable local revenue sources to replace lost land-sale income.
