Key Takeaways:
China's three-pronged housing finance overhaul ends the presale funding model that fueled a decade of high-turnover development.
China's central bank and regulators issued three coordinated documents Aug. 27-28 that effectively dismantle the presale funding model, locking buyer payments until projects are completed and cutting shareholder returns on new developments to about 9 percent from 27 percent.
"The policies will mend the trust crisis in the sector and boost consumer confidence as they address homebuyers' fears about stalled projects," said Zhang Dawei, an analyst at Centaline Property.
The People's Bank of China, the National Financial Regulatory Administration, the housing ministry and the securities regulator jointly rewrote the rules governing development financing, home sales and mortgage lending. Under the new framework, mortgages on presale homes are disbursed only after a project is completed and filed, down payments sit in fully regulated accounts until final inspection, and banks are barred from lending for land purchases. The maximum mortgage term extends to 40 years from 30, and nine differentiated credit-policy documents issued between 2003 and 2016 were abolished.
The reform shifts the burden of financing construction from homebuyers to banks and capital markets, a transition that raises peak capital needs about 2.6 times and will reshape an industry that has seen roughly $130 billion in developer defaults since 2021. The real test comes as local governments draft implementation rules and developers adjust to a slower-turnover model.
The sharpest provision sits in the PBOC's credit document: personal housing loans on presale projects must be disbursed only after completion and filing. Combined with full regulatory custody of down payments until final inspection, developers effectively lose access to buyer funds before delivery — a change that strips the presale system of its financing role while leaving the sales mechanism nominally intact.
The shift is already underway in the market. Completed-home sales rose to 32.16 percent of new-home transactions in early 2025 from a low of 12.7 percent in 2020, according to CRIC data, as buyers fled delivery risk after the 2021 market meltdown. In Hainan, five years of completed-home sales cut new-home complaints by 67 percent.
The new rules favor developers with low financing costs and deep balance sheets. Central state-owned enterprises took 50 percent of land purchases among 100 tracked developers in 2025, up 7 percentage points, with the top 10 buyers accounting for half of all spending, CRIC data show. "The policies would likely favor large developers with healthy liquidity, as they face less pressure to recover cash from projects," said Jeff Zhang, an equity analyst at Morningstar.
Smaller private developers with limited cash reserves are more likely to exit new development or shift to construction management and asset operations, Zhang Dawei said. The securities regulator's parallel push to shift financing from corporate credit to project-based structures — through REITs, CMBS and asset-backed securities — gives well-capitalized players a long-term capital exit while squeezing out leveraged rivals.
For homebuyers, the reform shrinks risk exposure from a full down payment plus mortgage to a small refundable deposit, since mortgages now begin only after delivery. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said policymakers "understand the urgency to stabilize the property sector." The transition carries near-term costs: a contraction in available supply as development cycles lengthen, and a second cash-flow shock for developers still carrying legacy debt. Whether the reform restores confidence depends on how quickly local governments convert the "priority" language on completed-home sales into binding rules.
This article is for informational purposes only and does not constitute investment advice.
