China to ‘vigorously, orderly’ expand sales of finished homes in property-sector overhaul

Stressing that a host of measures are being taken in the real estate industry to restore confidence and ensure the timely delivery of finished homes to buyers, authorities said on Friday that sales of finished homes will be “vigorously and orderly” expanded in more locales. And for select projects, the sale of finished homes will be stipulated when land is auctioned.

“Many localities have launched a number of trial projects to sell fully finished homes and have explored the reform of the housing sales system … Joint efforts are also being made to uphold homebuyers’ rights and interests and to help developers get funding to complete projects,” Dong Jianguo, deputy housing minister, said at a State Council press conference.

Beijing’s emphasis on selling finished homes is a rectification of the once-rampant practice of Chinese developers launching home sales when units were not built, or even before construction had started. Homebuyers who made down payments have often faced project delays or developer defaults. The country has seen a spike in project failures and delays in home deliveries amid the sector’s downturn.

The emphasis on selling homes only upon their completion is putting more strain on the cash flow of numerous developers, but the move has been hailed by homebuyers as a means of restoring lost confidence and shoring up transactions.

Officials also reaffirmed that measures will be earnestly implemented to guarantee timely home deliveries to buyers plagued by project delays and developer defaults, and that qualified builders are ensured access to easier funding under a so-called white list arrangement.

The property sector used to be a major growth driver, underpinning the economy by contributing to around a quarter of China’s gross domestic product if the output of related industries, including construction, is tallied together. Last year, the proportion of property added value accounted for about 6 per cent of GDP.

Now the sector is dragging the nation’s economic recovery, straining developer and local government finances, and even weighing on social stability amid protracted slumps.

Beijing has called for lower mortgage rates and down payments, amid other property-easing measures, in a bid to galvanise the market. At last month’s third plenum, Beijing also vowed to accelerate the establishment of a new model for the sector.

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While reforming financing for developers and home sales, Beijing has allowed regions to formulate localised boosting policies. In May, the State Council also convened a meeting about ensuring on-time home deliveries, to stave off risks.

At Friday’s presser, Dong revealed that the Ministry of Housing and Urban-Rural Development, together with financial watchdogs, had identified 3.96 million unfinished homes in troubled projects nationwide that are due to be delivered to their buyers by the year’s end, as per sales contracts.

He said ministries, local governments, financial institutions and courts are working under a financing-coordination mechanism to inject funding into developers to help them finish projects.

“All qualified developers must be included on the white list, and loans must be granted,” Dong said, calling the effort a battle that must be won to ensure home deliveries. He said 5,300 such “white list” projects across the country had received 1.4 trillion yuan (US$196 billion) worth of loans for their timely completion.

Dong also pointed to plans for the nationwide replication of a trial in the central city of Zhengzhou, Henan province, that has seen “white list” developers and projects given ample funding while homebuyers are prioritised for compensation if a developer goes under.