Why do the Opinions set new regulations governing foreign institutions and individuals' purchase of self-use/occupied property?
With the opening of China's economy and the gradual development of its real estate sector, overseas institutions and individuals are highly active in China's property market. But there are no clear rules and standards to regulate their presence, thereby crippling the market. China's land resources are scarce and its population is huge. China is facing land constraints. We must take a long-term view and step up supervision of property investment by overseas institutions and individuals.
According to the proposals, foreign institutions (excluding real estate operators) with onshore branches and representative offices in China and individuals who have worked or studied in the PRC for over one year may purchase self-use/occupied property on an actual need basis. These people are considered residents, whose economic activities are part of China's gross domestic product, hence enjoying part of their “natural man” rights and being allowed to purchase self-use/occupied property in the PRC. Those who have worked or studied in the PRC for one year or less can rent houses to meet their residential needs. Overseas Chinese and Taiwanese, Hong Kong and Macao residents are exempted from the one-year rule and are permitted to purchase self-occupied property in the PRC up to a certain floor area to the extent needed for living purposes.
Why must foreign institutions and individuals, who are qualified to purchase self-use/occupied property in the PRC, register with their real names when buying properties?
The real name system aims to curb speculative overseas investment and better supervise the property market as well as to improve market transparency, thereby maintaining the stability of the real estate sector. It is necessary to adopt the system, which is also applied to domestic citizens. When buying properties for their own use, overseas institutions must produce documents approving their presence in China while individuals must show effective certificate attesting to their over-one-year stay. All property rights registries will enforce the self-use/occupied property purchasing policies to the letter. Under the new policies, overseas residents who have worked or studied in the PRC for over one year are only allowed to buy one unit of commercial housing for their own use while foreign institutions (excluding real estate operators) with onshore branches and representative offices in China are permitted to purchase commercial housing for business. Real estate administration departments all around the country will further perfect the registration database of the equity market and ensure all forward commercial housing purchasing contracts are put on file. Any foreign institutions and individuals who fail to obey the regulation will not be permitted to make any house purchase.
What changes will the proposals bring to the detailed process of inward remittance and exchange settlement for housing purchases by foreign enterprises, overseas institutions and individuals?
To further regulate the foreign currency administration in the real estate sector, only commercial housing purchases that comply with the self-use/occupied property purchasing policies are allowed to go through related formalities, including foreign exchange receipt and disbursement and money order. Only after all related materials are examined and verified, and the foreign exchange transfer is settled by designated banks can overseas institutions and individuals, who intend to pay for their house by inward remittance from other countries or by foreign currency accounts, transfer money to the renminbi accounts of real estate developers. Overseas institutions and individuals are not permitted to directly remit foreign currency to real estate developers' foreign currency accounts. Overseas institutions and individuals, who have to terminate the property exchange and withdraw their prepayments for certain reasons, can transfer prepayments back to their foreign currency accounts only after the case has been investigated and verified by designated banks. Overseas institutions and individuals are allowed to transfer capital gains on commercial housing to their accounts only when the gains have been taxed and confirmed by related foreign administration departments.
