1. Shanghai has issued detailed guidelines granting a grace period for certain existing residential projects to use older pre-sale rules, making it the second first-tier city after Beijing to implement local regulations following a nationwide policy shift in late August. The rules aim to balance a national mandate to phase out the pre-sale business model—which contributed to developer defaults and stalled projects—with the need to ease immediate cash flow pressures on real estate companies. [para. 1][para. 2][para. 3]
2. On August 28, national ministries announced that newly acquired land and projects without construction work planning permits should prioritize selling completed homes. If developers choose to sell before construction completion, the building's main structure must be topped out before sales may begin. Under Shanghai's guidelines, projects that secured land before August 28, 2026, but lack a construction work planning permit may still apply for pre-sales under previous conditions until the end of 2027, provided local governments guarantee timely completion and funds are strictly supervised. Projects whose land auctions were announced before August 28 but remain unacquired can also use the old rules if they hit the market by the end of 2027. Both Beijing and Shanghai use the land auction announcement date as the cutoff for determining which rules apply. [para. 4][para. 5][para. 6][para. 7][para. 8]
3. Shanghai has introduced new fund supervision requirements similar to Beijing's. For projects with acquired land but no planning permit, all pre-sale funds must be deposited into a supervised account with a minimum retention threshold covering supporting construction fees and essential management funds, ensuring the project passes completion inspection and utility facilities are ready for delivery. Additionally, regardless of which pre-sale policy applies, individual mortgages for projects obtaining a pre-sale permit after August 28 can only be disbursed after the project completes its final construction filing, with loan funds paid directly into the supervised account. [para. 9][para. 10]
4. The core difference between new and old pre-sale conditions lies in the construction milestone required before market launch. Under the traditional system, a project typically took six to ten months from land acquisition to launch, while under the new topped-out rule, this cycle takes roughly one to two years. While Shanghai allows transitioning projects to follow old rules to help developers recover funds faster, initial pre-sales only generate approximately 15% of the purchase price as a down payment. With mortgage disbursements delayed and pre-sale funds tightly supervised, developers must tie up development loans and own capital for longer periods, increasing financing costs. Market research firm CRIC warned that developers' actual funding gaps depend on down payment inflows, development loan disbursement paces, land payment schedules and sales velocity, noting that companies can no longer rely on old models to project cash flow. [para. 11][para. 12][para. 13]
5. For projects adopting completed-home sales, land grantors must disclose sales information in the land auction announcement. Developers can collect a deposit of up to 3% of the total purchase price after obtaining a construction permit; if delivery is delayed, buyers may terminate the contract and the developer must refund the deposit and assume breach liability. Shanghai's 3% deposit cap is higher than Beijing's 1% limit. [para. 14]
6. To alleviate financial pressure, the guidelines allow residential land announced for auction after August 28 to have premiums paid in installments: at least 50% within 30 days of signing, with the balance due within one year, potentially extendable by another year without interest. Beijing allows the remaining balance over a maximum of two years without interest after the 50% down payment. However, land authorities cannot issue land-use certificates until the full premium is paid. While developers can apply for planning permits using the land transfer contract, they must pay the full premium before registering land-use rights and obtaining the first batch of pre-sale permits. The installment policy was designed to let developers use minimal capital and rely on sales revenue to cover the land price, but Shanghai's rules preserve the first half of this approach while cutting off the second, according to Ding Zuyu's Real Estate Review. [para. 15][para. 16][para. 17][para. 18]
7. Developers typically need to meet the standard "four-three-two" requirements for development loans: possessing four certificates (land-use certificate, construction land planning permit, construction work planning permit and construction work commencement permit), providing 30% of their own capital, and holding at least a tier-two real estate development qualification. It remains unclear how developers paying land premiums in installments can secure development loans before obtaining the land certificate, pending detailed implementation rules from the National Financial Regulatory Administration. [para. 19][para. 20]
AI generated, for reference only
Sign in with Google
Sign in with Facebook
Sign in with 财新