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China is introducing stringent new housing presale rules, which analysts say could have a dual impact on real estate developers: while the reforms aim to stimulate sales and stabilize prices, they may also squeeze cash inflows. According to the People's Bank of China (PBOC), down payments and mortgage funds will only be disbursed to developers once residential projects are fully completed, instead of the current practice of allowing funds to be accessed as soon as buildings are topped out.
This change could significantly delay cash flow for developers, as residential projects typically take six to 12 months from structural topping out to practical completion. Currently, property developers had secured 4.57 trillion yuan in funds in the January-July period, with deposits and advance receipts and mortgage proceeds making up 44.6% of the total funding pool.
Experts warn that developers' average levered return on investment could drop by up to 60%, and that aggressive mid-tier private developers might face significant challenges. The shift is anticipated to favor large-scale central and local government-owned developers, smaller players with low leverage, and new mortgage rules that ease homebuyers' financial burdens.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
