From August 27 to 28, the People's Bank of China, together with the Financial Regulatory Administration, the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources, the National Financial Regulatory Administration, and the China Securities Regulatory Commission, issued three documentary programs related to the development model of housing finance over two days. This is not a coincidence that three departments issued documents on the same day, but rather a carefully designed institutional collaboration.

The pre-sale system has not been abolished, but it has been "downgraded by system." The most crucial detail lies in Article 22 of the central bank's document—"For pre-sale projects, personal housing loans must be strictly issued after project completion and filing."

This means that off-plan properties can still be sold, but the buyer's down payment and mortgage payment won't reach the developer before the house is completed. The financing function of pre-sales has been effectively reduced to zero, nominally retained, but in essence, it has become a "ready-to-move-in home."

This reform answers a core question: After the era of high turnover ends, who will provide financing for real estate development? The answer is: bank project loans, REITs and M&A tools in the capital market, and developers' own funds. Buyers' money is no longer put into the developer's balance sheet.

| Ministry of Housing and Urban-Rural Development: Five tough measures to lock developers from misappropriating home purchase payments

The notice from the Ministry of Housing and Urban-Rural Development focuses on three major areas: improving pre-sale management, vigorously and orderly promoting the sale of completed homes, and strengthening coordination of policy measures. Each point to the same goal—to completely deprive developers of the space to misappropriate buyers' funds.

The three strictest core regulations:

The threshold for pre-sale has been significantly raised. Previously, most cities could start selling homes as long as they "reached zero or negative value" or "investment reached 25%)." Now, a unified requirement is for "the main structure of individual buildings to be topped out" before pre-sale, with the sales date pushed back by about a year.

Full supervision of home purchase funds. All home purchase payments, including down payments and mortgage loans, must be fully deposited into government supervision accounts—not just a portion of the funds, but 100% fully locked. Moreover, this money must remain frozen until the project is completed and accepted—not the old "topping out and release" approach, but waiting until the conditions for delivery are truly met.

New supply is now available by default. For newly transferred land, as well as projects that have already been transferred but have not yet obtained construction planning permits, "priority is given to selling" ready-to-move-in homes. The reform started directly from the land side. Although it did not announce the abolition of pre-sales, new supply has already defaulted to completed homes.

Two other designs that are often overlooked but very important:

Deposit system: Equips completed home sellers with "customer retention tools." For completed home sales projects, after obtaining the construction permit, a small deposit can be collected from buyers. The deposit is supervised by the government and must be refunded if the developer breaches the contract. This regulation solves a practical problem: for ready-to-move-in properties, it may take three to four years from land acquisition to payment. Without a deposit system allowing developers to lock in customers early, their willingness to acquire land would drop significantly.

Land acquisition with own funds: cutting off the high-turnover model at the source. The Ministry of Natural Resources clearly requires developers to use their own funds to purchase land, and land transfer fees can be paid in installments. This directly blocks the previous high turnover starting point of "borrowing pre-financing funds to acquire land, then mortgage after acquiring land, and rolling expansion."

| Central Bank: Abolish nine old regulations at once

The central bank's most fundamental breakthrough in this document is not a specific clause, but rather the one-off repeal of nine differentiated housing credit policy documents issued between 2003 and 2016, including Yinfa [2003] No. 121, [2007] No. 359, [2010] No. 275, [2016] No. 26, and others. These documents were once the "toolbox" for various real estate regulatory campaigns—interest rate hikes, loan restrictions, down payment ratios, and interest rate reductions all originated from here. Complete abolition means that housing credit has officially shifted from being a "tool for making decisions based on the right moment" to a "systematic management rule."

The six most critical new provisions:

Article 5: Prohibition of loan land purchase. Banks are not allowed to issue loans used to pay land transfer prices and related taxes and fees. This is interlocked with the Ministry of Housing and Urban-Rural Development's notice that "developers must use their own funds to purchase land"—if local governments allow real estate companies to take out loans to buy land, it is now explicitly prohibited by the central bank.

Article 22: The mortgage for pre-sale houses will only be disbursed after completion. This is the sharpest point in the entire set of policies. Off-plan properties can continue to be sold, but the mortgage loan for buyers must wait until the project is completed and filed before it can be issued. Combined with the Ministry of Housing and Urban-Rural Development's regulation that "supervision is lifted after completion acceptance," developers of pre-sale projects can hardly obtain any purchase funds before completion—the financing function of pre-sale is effectively reduced to zero.

Development loan matrice: directly linked to the sales model. For pre-sale projects, loans should generally not exceed 3 years, with a maximum of 5 years; For completed home sales projects, the period should generally not exceed 5 years, with a maximum of 7 years; Commercial real estate must not exceed 7 years. The initial principal repayment date should, in principle, be after the completion filing. The design of the term is directly linked to the sales model, indicating that regulators have already assumed that completed home sales are a "slow turnover" model.

Host Bank System: Each project locks to one bank. Each project corresponds to one sponsoring bank, and all project funds (except for pre-sale funds and deposits supervised according to regulations) must be managed in a dedicated account by the sponsoring bank. During the project duration, the sponsoring bank and fund account are generally not allowed. This is equivalent to locking project funds into an "account cage," making it impossible for developers to allocate funds across projects.

个人住房贷款期限延长至40年。 此前上限为30年，现在延长至40年，月供压力相应下降，为需求端提供托底。

Article 24: Dynamic adjustment mechanism for existing mortgage interest rates. When the deviation between the existing mortgage rate and the newly issued rate reaches a certain extent, the borrower can negotiate with the bank to adjust the rate or apply for a new loan to replace the old loan. The batch of administrative rate cuts in 2024 has now been institutionalized and normalized—from now on, you won't have to wait for the central bank to issue a notice; interest rates can automatically adjust when they deviate by a certain margin.

Off-plan properties can continue to be sold, but the mortgage payment will only be paid after the completion and filing of the project. After the combined sales and credit side rules, available home purchase funds before completion for pre-sale projects approach zero—the financing function of pre-sale is effectively reduced to zero.

| CSRC: Building a new financing system for the era of completed home sales

The core of the CSRC document is one sentence: "Reform the financing methods for real estate development and promote a shift from relying on entity credit to project-based performance." "

In the past, developers relied on "company credit" for financing—as long as the company was large and had a high rating, they could borrow money. Now is the shift to "project credit"—banks and investors look at the quality and cash flow of individual projects themselves, rather than the developer's brand.

How exactly do you convert? The CSRC has provided four tools:

Refinancing Instruments. Support listed real estate companies in acquiring property-related assets through additional stock issuance, targeted convertible bond issuance, cash acquisition, and other means. This provides ammunition for industry consolidation—big fish eat small fish, and money is needed.

Bond financing instruments. Increase issuance of products such as CMBS (Commercial Real Estate Mortgage-Backed Securities) and Real Estate ABS (Asset-Backed Securities). Simply put, it means packaging the rental income generated by already built properties into bonds and selling them to investors, allowing early capital recovery.

REITs tools. Support the issuance or expansion of REITs (Real Estate Investment Trusts) for rental housing and urban renewal projects, while steadily and prudently advancing commercial real estate REITs. REITs solve the "holding and operation phase" exit problem—once the house is built and operational, REITs can be listed and cashed out, no longer holding onto the property forever.

Private equity investment funds. Support the establishment of real estate private equity investment funds to provide long-term capital for the project's preliminary development and holding operations.

These tools address the same core issue: under the completed home sales model, the cycle from land acquisition to payment is significantly extended, asset cycle shifts slowly, and traditional short-term bank loans are no longer sufficient. The new financing system has formed a clear division of labor—bank loans address the development phase, REITs and ABS handle the holding and operation phase, and M&A tools address the industry integration phase. Each of the three tools manages a segment, forming a complete "long-term financing system."

| The 'Interlocking Architecture' of Three Documents

The common underlying logic of the three documents is simple: to sink the smallest unit of risk isolation from "real estate groups" down to "individual projects."

Specifically, the three departments each manage one aspect but point to the same goal:

The Ministry of Housing and Urban-Rural Development manages 'subject isolation.' A project development company system is implemented, where each project establishes an independent company, and each plot of land corresponds to a set of independent land mortgages. A project is a project, a group is a group, and the two are legally completely separated.

The central bank manages "fund segregation." A sponsored bank system is implemented, with each project corresponding to one sponsoring bank. All project funds are transferred into a single closed account, and loans cannot be changed before the loan is settled. Funds can only circulate within this "cage," and the group headquarters can no longer coordinate across projects.

The CSRC oversees "financing segregation." Promote financing from relying on "entity credit" to focusing on "project conditions." Whether it's refinancing, REITs, or ABS for listed real estate companies, they are all based on specific projects or asset packages, rather than the group's overall credit.

The effect of stacking the three documents: The capital operation space of the real estate group headquarters is greatly compressed, and individual projects become independent accounting units, financing units, and risk isolation units.

What does this mean? Even if problems arise at the group level in the future, it may not necessarily affect the delivery of specific projects—because the funds and assets of each project have already been institutionally segregated. In the past, "if a project collapsed, the whole group would collapse along with it; The chain reaction of the entire group collapsing and all projects being left unfinished will be effectively stopped under the new system.

Kingtek's Perspective | Understanding the main thread behind this institutional restructuring

After the pre-sale financing function is zero, developers must use their own funds to acquire land, use bank project loans to build houses, and only pay after completion—the entire development cycle has been extended from six months to one year to two to three years.

This means that small and medium-sized real estate companies with high leverage and rolling expansion through pre-sale payments will be eliminated more rapidly, while central and state-owned enterprises with ample cash flow and low financing costs and a few quality private companies will gain a larger market share. Industry concentration will further increase, and the valuations of leading companies are expected to undergo a systematic reassessment.

Under the completed home sales model, developers have shifted from "fast turnover" to "slow turnover," and the demand for capital exiting during the holding and operation phase has increased significantly. As core tools for connecting the entire "development-operation-exit" chain, REITs and ABS are poised for unprecedented development opportunities.

Focus on the issuance rhythm and scale expansion of rental housing REITs, commercial real estate REITs, and real estate ABS.