China's central bank and financial regulator have jointly issued a sweeping new policy document on August 28th, aiming to overhaul the real estate credit system and accelerate the formation of a new development model for the housing sector. This comprehensive set of measures introduces significant changes to how development loans are managed and how mortgage payments are structured, directly impacting both property developers and homebuyers across the country.
The new policy establishes a lead bank system for development loans, addressing a critical weakness in the current framework. In the pre-sale model, project companies commonly use pre-sale funds, including down payments and individual housing loans, to replace development loans after sales begin. This practice shortened the effective period of development loans and complicated closed fund management, weakening their ability to support project completion. Under the new system, each real estate project will designate a single lead bank. All project-related funds, including development loans, project equity, and cash-sale proceeds—excluding regulated pre-sale funds and deposits—must be held in accounts opened at the lead bank. Pre-sale fund supervision accounts and deposit accounts must also be established at the lead bank according to housing authority regulations.
The lead bank will independently issue development loans or lead a syndicate, disbursing funds in stages based on construction progress and risk profiles. Payments will be made through the project company's designated lead bank account to its transaction counterparties. Loan terms will now align with the construction and sales cycle, spanning from project commencement to completion filing. Crucially, the first principal repayment will typically be scheduled after the project's completion filing, with loan terms capped at three years for pre-sale projects, extendable to five years maximum, and five years for cash-sale projects, extendable to seven years maximum. The lead bank and designated accounts cannot be changed before the development loan is fully settled, ensuring funds are used exclusively for their intended purpose while more efficiently meeting project financing needs. Additionally, project companies must inform the lead bank in advance of any major events affecting financial debt security, such as external liabilities or investments.
For individual homebuyers, the policy introduces long-awaited protections that address the pain point of paying mortgages on unfinished homes. The previous "loan disbursement upon structural topping-out" requirement has been deemed outdated, as significant interior finishing and landscaping work remains after the main structure is completed. This created scenarios where buyers of stalled projects faced mortgage obligations without receiving their properties. The new rules stipulate that for newly built homes sold on a cash-sale basis, mortgages must be disbursed after sales filing, while for pre-sale properties, mortgages can only be released after project completion filing—ensuring buyers "get their keys before starting repayment."
Mortgage disbursement will now use a commissioned payment method, with funds transferred directly to the project company's lead bank account for cash sales, or to the pre-sale fund supervision account for pre-sale properties. In a significant move to boost purchasing power, the maximum mortgage term extends from 30 to 40 years, giving both lenders and borrowers greater flexibility. The specific term will be determined through consultation between buyers and commercial banks based on their circumstances.
Banks also gain expanded authority for debt restructuring. For existing borrowers who have temporarily lost income sources and face repayment difficulties, commercial banks can now negotiate directly with borrowers under market-based and rule-of-law principles, offering flexible options such as extending repayment periods, loan extensions, or delayed principal payments to adjust repayment schedules.
The policy comprehensively covers real estate loan products across all segments and phases of the property lifecycle. During the development and construction phase, banks can extend development loans for commercial housing, affordable housing, rental housing construction, and commercial real estate. In the sales phase, purchase loans are available for individual homes, group purchases for rental housing, and commercial property acquisitions, supporting buyers or enterprises for residential, operational, or leasing purposes. During the operation phase, banks can offer operating loans including those for income-generating properties and rental housing operations, facilitating housing quality improvements and industry transformation.
Recognizing the evolving supply-demand dynamics in the real estate market, the policy includes a fallback clause allowing the central bank and financial regulator to introduce new real estate loan categories as economic development needs dictate. This forward-looking provision ensures the framework can adapt to future market conditions without requiring wholesale legislative changes.