China property crisis: Why Beijing is moving away from the pre-sale model
China is implementing new measures to reduce the property sector's reliance on the pre-sale model, requiring projects to be completed before mortgages are issued. These steps aim to stabilize the crisis-hit real estate market and prevent delivery risks for homebuyers.
Why it matters
This shift represents a significant structural change in China's massive real estate sector, which is critical to the country's overall economic health.
China on Friday unveiled a series of measures aimed at reducing property developers' reliance on funds collected from homebuyers before projects are completed, as Beijing seeks to curb risks and restore confidence in its crisis-hit real estate sector.Under new guidelines issued by China's central bank and financial regulator, a homebuyer’s mortgage will be issued only after a housing project has been completed.Another set of guidelines requires local governments to promote the sale of completed homes to “fundamentally prevent delivery risks”, according to Reuters.Mortgage only after project completionChina's property developers have for decades relied on a pre-sale model, selling homes before they were ready for delivery to fund debt-fuelled and high-turnover operations.However, the model came under scrutiny after construction at some presold projects stalled following the property market meltdown in 2021, which drained developers' cash and triggered protests by homebuyers.The new policies could help address buyers' concerns about stalled projects, according…
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