Eight documents were released in two consecutive days, and the real estate sector is ushering in an "institutional overhaul".
Eight documents were issued within two days, and 10 old regulations were abolished. The policy adjustments cover the entire chain of the real estate market, including land acquisition, financing, construction, sales, mortgage and delivery, ranging from the project company system and the lead bank system for financing to pre-sale conditions, fund supervision and the term of development loans.
Spot housing sales have thus been officially pushed to the center of the stage. A clear signal is that the decision-making authorities are accelerating the construction of a new development model for the real estate sector in accordance with the established construction blueprint.
On August 28, the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources, and the National Administration of Financial Regulation jointly issued the Notice on Improving the Commercial Housing Sales System; the People's Bank of China and the National Administration of Financial Regulation jointly issued the Opinions on Reforming and Improving Real Estate Credit Management to Promote the Accelerated Construction of a New Real Estate Development Model; on the same day, the National Administration of Financial Regulation released five administrative measures covering commercial housing development loans, individual housing loans, commercial real estate loans, urban renewal project loans, and real estate trust business.
The previous day, the China Securities Regulatory Commission issued the Opinions on the Capital Market Supporting the Construction of a New Real Estate Development Model, proposing to reform and improve the real estate financing system and build a capital market service system that matches the new real estate development model.
Over the past two decades, the capital circulation of the real estate industry has revolved around the pre-sale system, which has fostered the "high debt, high leverage, high turnover" model. In recent years, the market has continued to slump, sales proceeds have slowed down, and risks such as misappropriation of pre-sale funds, project suspension and delayed delivery have been intensively exposed.
When the three departments answered reporters' questions on the Notice on Improving the Commercial Housing Sales System, they stated that the recent public ruling on the bankruptcy and liquidation of Evergrande Real Estate and the Xu Jiayin case is a powerful proof of the drawbacks of the "three highs" model in real estate development and operation. To change the "three highs" model, it is urgently necessary to reform the commercial housing pre-sale system and strengthen the supervision of pre-sale funds, so as to guide real estate development enterprises to reasonably determine the scale of their development and operation based on their own strength, strengthen risk awareness, and promote the sound operation and high-quality development of the real estate industry.
The impact of real estate liquidity risks has long gone beyond the industry itself. The concentrated risk exposure of real estate enterprises has weakened market confidence, falling housing prices have affected residents' balance sheets, and consumption willingness has been suppressed; upstream and downstream industries such as construction, building materials, home appliances, home furnishing and finance have all been affected; in 2025, local government revenue from the transfer of state-owned land use rights was less than half of that in 2021.
A series of new policies were intensively introduced against this backdrop. Different from the past, this time the basic system of the real estate industry has been systematically rewritten. A senior executive of a state-owned real estate enterprise told the Economic Observer that this set of policies is not a general market regulation, but a reconstruction of the industry's operation system.
Regulate Pre-sales, Encourage Spot Housing Sales
On the day the new policies were released on August 28, the headquarters of a large real estate enterprise group convened a meeting of the heads of relevant business lines in all regions and cities, requiring a nationwide suspension of investment and a comprehensive inventory of existing projects. After the headquarters meeting, the regional company assessed the impact of the policies on sales, decided to suspend customer acquisition for projects that have not yet obtained pre-sale permits, and allocated resources to varying degrees to projects that have obtained permits based on de-selling rate, completion nodes and other indicators.
Gao Huan, a regional sales head of the real estate enterprise, is in charge of a residential project that has been acquiring customers for several months, originally planned to obtain the pre-sale permit in mid-September and launch sales around the National Day holiday. However, on August 31, the project's reception center was temporarily closed, some sales staff were reassigned to other projects, and several finalized marketing activities were also canceled.
The project is currently in the main construction stage, with several individual buildings built to the third or fourth floor, and most of the buildings have just reached the "zero mark" (the reference level of the main project, meaning that the underground part of the main project is fully completed). The new regulation stipulates that for commercial housing projects implementing pre-sales, the main structure of a single building shall be fully capped, and the specific conditions shall be determined by local authorities in light of actual local conditions. According to this requirement, the project can only apply for a pre-sale permit after the main structure is capped.
The market holds different understandings of the clause that "specific conditions shall be determined by local authorities in light of actual local conditions". The research report of Orient Securities believes that the new regulation does not set the capping of main structure as a unified mandatory requirement across the country, and local authorities still have certain flexibility; while Guosheng Securities, Kaiyuan Securities and Morgan Stanley believe that obtaining pre-sale permits after main structure capping will become the bottom line.
No matter how the local detailed rules are formulated, the postponement of sales nodes has been made clear. Under the old regulations, it usually takes about half a year for a project to obtain the pre-sale permit from the land acquisition. The new regulation takes the capping of main structure as the pre-sale condition, so the time to obtain the permit may be extended to about one year; if spot housing sales are adopted, the cycle may reach about two years.
Gao Huan is still waiting for the city where the project is located to issue the implementation detailed rules. Although the new regulation does not ban pre-sales, the group needs to re-evaluate the impact of the policies on pre-sale projects and whether home buyers will still accept pre-sales before determining the project launch plan and timeline.
In her view, after the sales model shifts from pre-sales to spot housing sales, the influence of sales staff on transaction completion will weaken. Under the pre-sale scenario, sales staff can promote transactions by describing the future form of the project; when it comes to spot housing sales, the products and supporting facilities are already presented, and home buyers' judgments depend more on the actual quality.
Since the market returned to normal, many new houses have a low de-selling rate in the pre-sale stage, and most of the houses are sold only after they are converted into spot houses, which is already a de facto spot housing sales scenario. Under the new policies, pre-sale projects and spot housing projects compete on the same stage. Gao Huan believes that home buyers will be more inclined to purchase spot houses, and the pre-sale system will be naturally phased out.
A real estate researcher believes that in the past commercial housing pre-sales, after the pre-sale contract and mortgage contract are signed, the risks of project construction and enterprise operation are transferred to home buyers to a considerable extent. Even if the project is suspended, the borrower still needs to fulfill the mortgage repayment obligation. Promoting spot housing sales and strengthening pre-sale fund supervision can reduce the delivery risks caused by the "pay first, receive house later" model.
Reset of Capital Chains
The postponement of sales nodes has the most direct impact on real estate enterprises by delaying the return of sales proceeds. The above-mentioned senior executive of the state-owned real estate enterprise said that under the old regulations, it usually takes about half a year for projects in first- and second-tier cities to start receiving proceeds from land acquisition. After the main structure is capped and mortgage loans are issued, the cash flow gradually reaches its peak; for some projects, after the funds in the supervision account meet the construction needs, the surplus part can be withdrawn in an appropriate amount.
Under the new policies, it takes at least one year for a project to receive proceeds from land acquisition, and the proceeds cycle for spot housing sales projects is more than two years. The supervision of pre-sale funds has also been further tightened. The down payments of home buyers, individual housing loans and other funds must be fully deposited into the supervision account, and the supervision can only be lifted after the project completes the completion acceptance and supporting facilities such as water, electricity, gas and heat meet the delivery conditions.
The above-mentioned senior executive of the state-owned real estate enterprise estimates that after the implementation of the new policies, the proceeds recovery time of real estate enterprises will be delayed by at least one year. During the project construction period, home purchase funds will no longer be the main source of construction funds, and the capital pressure in the early stage of development will increase accordingly.
The new policies no longer distinguish between "key supervision quota" and "non-key supervision quota", and all home purchase funds are supervised until the project is completed and filed. Kaiyuan Securities judges that the pre-sale funds of new projects will be closer to full-process closed management.
The above-mentioned senior executive of the state-owned real estate enterprise said that since 2022, for the need of ensuring delivery, the pre-sale funds of projects of private enterprises and some state-owned enterprises and mixed-ownership real estate enterprises with weak credit have been close to full-process closed management; a few central enterprise projects in some cities can still withdraw surplus funds appropriately. Therefore, he judges that before and after the implementation of the new policies, the change of capital supervision intensity for private real estate enterprises and mixed-ownership real estate enterprises is limited, and the cash flow of large central enterprises and leading local state-owned enterprises may be more affected.
After sales proceeds are locked, development loans are also strictly restricted. In the past, projects started sales during the construction period, and the proceeds could be used to repay development loans and pay project payments, and the group headquarters could also allocate funds between different projects. The new rules require that development loans shall not be allocated across projects, shall not be used to pay land transfer fees and related taxes, project dividends or other investments; project income shall not be collected to the group, parent company or other affiliated enterprises, and shareholders shall not withdraw their capital contributions. The above-mentioned senior executive of the state-owned real estate enterprise believes that the capital pool of the group headquarters will gradually disintegrate as a result.
Accordingly, the role of development loans has also changed. In the past, development loans were mainly used to connect pre-development financing and pre-sale funds, and played a limited role in project construction.
In accordance with the new regulations, the term of development loans for pre-sale projects shall in principle not exceed 3 years, with a maximum of no more than 5 years; the term of development loans for spot housing sales projects shall in principle not exceed 5 years, with a maximum of no more than 7 years; the first principal repayment shall be arranged after the project is completed and filed. The debt repayment pressure during the project development period is thus reduced, development loans undertake more construction funds, and the project's dependence on sales proceeds from development and construction to completion filing is reduced.
The CSRC document proposes to reform the real estate development financing methods, and promote the shift of real estate development financing from relying on entity credit to being based on project conditions. The new regulations also adjust trust financing, equity financing, bond financing and capital market financing respectively. The above-mentioned senior executive of the state-owned real estate enterprise believes that the financing channels available for real estate enterprises have increased, but various types of financing have more restrictive clauses and higher access thresholds.
The role of financial institutions in real estate development is also facing reset. In the past, financial institutions granted credit to the group and relied on the endorsement of entity credit, while in the future they will shift to individual projects. The lead bank system requires banks to upgrade from simple lenders to closed managers of project funds. In the past, developers could divert funds between different banks and different projects, so that they could operate at the limit even with "10 pots and 7 lids". Now the lead bank has to take full-cycle fund supervision responsibility for the project to ensure that funds are used for specified purposes. The extension of loan terms is designed to match the project construction cycle, but it also means that bank funds are deposited in the project for a longer time, which puts forward higher requirements for the bank's asset management and risk pricing capabilities.
Shrinking Investment Radius
After the new policies were introduced, the real estate enterprise where Gao Huan works has suspended external investments in principle. She explained that suspending investment does not mean no longer acquiring land, but the group needs to rearrange funds according to the new proceeds recovery model, and establish a full-cycle cash flow management system on a project-by-project basis to meet the requirements of the project company system, the lead bank system for financing and closed fund management.
With the change of the proceeds recovery model, the investment return cycle of real estate enterprises is extended accordingly. In the era of high turnover, a sum of capital can be invested twice or even three times within one year; after 2022, a small number of real estate enterprises can still recover part of their investment in about half a year to one year; under the new policies, a sum of capital invested will take two to three years to be recovered.
Gao Huan said that according to the original plan of the group, several projects in her region would recover part of the investment within the year. After the new policies, this plan has been postponed to next year or the year after. If the sales proceeds in the region fail to meet expectations, the next-step investment plan will also be seriously affected.
In her view, the reduction or postponement of proceeds recovery will reduce the disposable funds of real estate enterprises in stages, and the investment, construction start and completion plans made at the beginning of the year will all have to be overturned and remade. "For example, our original annual investment plan was 50 billion yuan, but we can only recover 20 billion yuan, and we have to reserve 5 billion yuan for emergency, so we can only invest a maximum of 15 billion yuan."
The above-mentioned senior executive of the state-owned real estate enterprise said that after the new policies were introduced, his group will further shrink the investment scope, and in principle will no longer enter third- and fourth-tier cities, and some districts and counties with good market conditions in the southeast coastal areas will also be excluded. Future investments will be concentrated in no more than 10 core cities, and opportunities will be sought mainly in the core areas of these cities.
He said that since 2023, affected by the market downturn, most of the projects invested by his group are in a loss-making state. The gross profit margin calculated at the time of land acquisition can reach 30%, but after various discounts are calculated after the project launch, the gross profit margin is only about 20%; clearing the inventory within one year can maintain a certain profit, clearing the inventory in two years can break even, and failing to clear the inventory within two years will lead to losses.
In his view, in the past, investment and land acquisition mainly judged the market situation at the time of project launch half a year later, and mistakes were still made frequently; under the new policies, it is necessary to predict the market situation one or even two years later, and in the current uncertain market, it can only depend on luck.
"We originally only emphasized the core locations of core cities, but in the future, this selection logic is far from sufficient, and the granularity of the investment model needs to be more refined." He said that whether it is a pre-sale project or a spot housing sales project, the new policies put forward higher requirements for the investment capability of real estate enterprises. Cash flow constraints, market uncertainty and increased investment difficulty will further restrict the investment and new construction scale of real estate enterprises.
A city company head of a real estate enterprise told the Economic Observer that after the new policies, the investment amount in the city where he works will be reduced by about half, and several projects that were originally planned for key investment in the second half of the year are no longer "must-win". The group's focus in the next stage is to digest the existing stock projects as soon as possible.
He predicts that in the coming period, the new supply of new houses will decrease, and the oversupply situation in the new housing market will improve to some extent. However, leading developers still have considerable inventory at present, and clearing inventory in the short term may cause stampede in local markets, especially for stock projects in non-core areas, which are in urgent need of rapid realization.
Reconstructing the Real Estate Sector
The formation of China's real estate system began with the transition of urban housing from welfare distribution to commercialization. With the growth of urban population, housing supply has become increasingly tight. In the early 1990s, commercial housing began to appear. The Urban Real Estate Administration Law promulgated in 1994 established the commercial housing pre-sale system. After the "housing reform" launched the monetization reform of housing distribution in 1998, the commercial housing pre-sale system was continued through regulations such as the Regulations on the Administration of Urban Real Estate Development and Operation, and has been used in commercial housing sales to this day.
The above-mentioned real estate researcher once participated in the formulation of housing reform policies. He told the Economic Observer that at that time, there was a shortage of urban housing and state-owned enterprises had insufficient development funds, so the commercial housing pre-sale system was launched by referring to the "pre-sale of uncompleted flats" practice in Hong Kong. He believes that this system should have been adjusted in a timely manner with the change of market conditions, but for various reasons, it has been continued for about 30 years.
According to the housing reform design in that year, housing supply "walks on two legs": one is the affordable housing system with social security nature for low- and middle-income families, and the other is the commercial housing supply system for high-income families. However, the development of the affordable housing system has always lagged behind the commercial housing system.
The above-mentioned real estate researcher believes that the development of the affordable housing system lags behind, and the housing demand of low-income groups cannot be met, so they can only buy commercial housing, and have to empty the "six wallets" for this purpose. This is the root cause of the high proportion of real estate and housing loans in household assets and liabilities.
Under the pre-sale system, home buyers pay the down payment and mortgage loans to developers before the project is completed; pre-sale funds are generally