China's Real Estate Reform 2026

30 September 2026

China has quietly ended the business model that built its property boom. On 28 August 2026, five national agencies released a coordinated package that moves new housing from "sell first, build later" to "build first, sell later."

For two decades, developers bought land, sold flats off-plan, and used buyers' money to fund construction and the next land purchase. That cycle drove growth, and it also produced the unfinished-project crisis of recent years.

What the 8·28 package takes away is the quick return on presales, the early cash that let developers snowball one project into the next. CITIC Securities describes it as a systematic rebuild of the presale system and high-leverage financing model that ran for more than 20 years. A NetEase analysis makes a similar point: higher presale thresholds, completed-home sales, longer loans and ring-fenced project cash leave little room for the high-debt, high-turnover model.

The headlines focus on buyers, who are now far better protected. The more important story is funding: who pays for construction, when developers see their money, and who can still afford to play.

The announcement

The package came from MOHURD, the Ministry of Natural Resources, the National Financial Regulatory Administration (NFRA), the People's Bank of China and the CSRC. It covers three fronts at once: how homes are sold, how projects are financed by banks, and how developers raise capital.

Document	Issued by	What it does
Notice on Improving the Commercial Housing Sales System (建房规〔2026〕3号)	MOHURD, MNR, NFRA	Presale only after the structure is topped out; all buyer money into escrow until handover; completed-home sales preferred for new land
Opinion on reforming real estate credit management	PBOC, NFRA	One lead bank per project, with all project cash under its closed management; loan terms matched to the build cycle
Personal Housing Loan Measures (trial)	NFRA	Mortgages on presale homes paid out only after completion filing
Capital-market measures	CSRC	Pushes project-level and equity financing rather than reliance on parent-company credit

The reform draws a clear line. Projects that held a construction works planning permit before 28 August keep the old presale and escrow rules. New land, and land without that permit, should go to completed-home sales, or presell only under the tougher conditions.

The land policy

There is no standalone land document. The land measures are folded into the sales notice, which lets cities allow land premiums to be paid in instalments. Beijing and Shanghai each wrote their own version of the detail.

City	Status	Land premium instalments	Deposit cap on completed-home sales
Beijing	Final rules, 24 Sep 2026	Up to 2 years	1%
Shanghai	Final rules, Sep 2026	"1+1" model, with at least 50% in the first stage	3%
Wuhan	Draft, not officially confirmed	Up to 2 years, 50% within 1 year	Not reported
Hangzhou	No local rules yet	Not yet set	Not yet set

This matters because land is the biggest single cash outlay. Spreading the payment is the main lever cities have to offset the cash developers lose from presales.

The funding impact

In plain terms, developers must now finance almost the entire build with their own equity and bank loans. Buyer money arrives, but it sits in escrow until the homes are ready to hand over.

1. Presale cash is frozen until handover. Down payments and mortgage proceeds go into a supervised account at the project's lead bank. The money is released only after completion acceptance, with water, power, gas and heating ready.
2. Mortgages arrive later. For presale homes, banks pay out mortgages only after completion filing. The old habit of recycling mortgage cash into the next land deal is gone.
3. Deposits are not working capital. Developers selling completed homes can take small deposits once they have a construction permit. Because deposits must be refunded if the developer defaults, they are escrowed and effectively unusable.
4. Loans get longer, and tighter. Development loans can now run up to 5 years for presale projects and 7 years for completed-home projects. First principal repayment generally comes after completion filing. The trade-off is that the lead bank controls all project cash and must be told in advance about major debt or investment decisions.
5. Tax falls due before the cash. VAT, land appreciation tax and income tax have traditionally been prepaid at the point of sale. With proceeds locked up, a developer could owe more tax the more it sells, while holding no usable cash. Wuhan's draft rules defer these prepayments until each building completes. Other cities will need a similar fix.
6. Bank guarantees become the escape valve. A developer can swap escrowed cash for a bank guarantee and get the money released. In Hangzhou, a central SOE has already done this with a ¥118 million guarantee from ICBC. Only developers with strong bank relationships can do this at scale.

The escrow rules so far

Several rules on escrowed presale money are already settled:

• Mortgage proceeds are paid straight into the escrow account by entrusted payment, so they never pass through the developer (Beijing rules).
• The money stays with the project. Developers can no longer use sales receipts to roll into new land, as one State Council researcher put it, and it can't be moved to other projects or up to the parent company.
• Supervision ends only after completion acceptance, with water, power, gas and heating ready for handover.
• If the developer fails to deliver on time, buyers can cancel and have their money returned.
• A bank guarantee can stand in for escrowed cash, which releases it early.
• Development loans are drawn in stages as construction progresses, and paid through the lead bank directly to contractors and suppliers (Beijing rules).
• Loans, the project's own funds and completed-home sales proceeds all sit in a single lead-bank account: one project, one bank, one account (Shanghai rules).

One question remains open. Whether escrowed money can pay construction costs before completion is still undecided, and Beijing says its detailed escrow measures will be issued separately.

The net effect is a shift from company credit to project credit. A well-run project with sound cash flow can now borrow even if its parent is weak. But the capital needed to reach completion is much larger, and it is tied up for much longer.

The Hangzhou picture

Hangzhou has not published its local rules, so developers there are still pricing with gaps. The first signal is the city's first residential land listing since the reform, in Xiaoshan. It lets the winning bidder choose presale or completed-home sales, and it sells on 30 October 2026.

Early demand data is mixed. In September, second-hand viewings rose 21% on August and deals rose 18.8%. New-home viewings rose 7.5%, but subscriptions only 1.3%. Buyers are moving, but many prefer homes they can see today.

Three questions will decide how hard the reform bites locally:

• How long the land instalment period will be, and how much is due up front.
• Whether completion acceptance can be split by building, so cash is released in stages.
• Whether sale-stage tax prepayments are deferred to completion, as in Wuhan's draft.

The verdict

The reform is right in principle, but it rewards balance sheets, not skill alone.

Group	Likely effect
Buyers	Clear winners: less risk of unfinished homes, and no mortgage payments before the home is ready
State-owned developers	Stronger: cheaper capital and bank relationships make guarantees and long builds easier
Private developers	Squeezed: longer cash cycles push them toward joint ventures or out of the market
Existing projects on sale	A window: fewer new launches for a while means less competition
Land sellers (local governments)	Lower prices and fewer bidders, especially for outlying plots

The land market is already showing this. In Zhejiang, most plots are still bought by local government platforms and state entities, and private developers are holding back. Expect money to crowd into prime central sites while suburban land struggles.

My view: this is the most important change to China's housing system since the 1998 housing reform. It fixes the root cause of unfinished homes, and that is worth a great deal. But the cost of that fix is borne by developers' capital. In the next two years, I expect less new supply, more consolidation, and more joint ventures. The winners will be those with access to patient capital and strong bank relationships, not those who were best at the old high-turnover game.

For anyone holding completed or nearly completed stock, the next 12 months may be a good selling window. That window is real, but it is not a guarantee of higher prices. Buyers are cautious, and the second-hand market is competing hard.

Sources

Official documents:

• MOHURD: Notice on Improving the Commercial Housing Sales System (建房规〔2026〕3号), full text
• Xinhua: the three agencies' official Q&A on the notice
• NFRA: Personal Housing Loan Measures (trial), full text

Analysis and reporting:

• DeHeng Law Offices: key points of the 8·28 package
• King & Wood Mallesons: commentary on the sales notice
• CITIC Securities joint analysis (via Tencent News)
• Sina: one month on, Beijing and Shanghai rules compared
• NetEase: Beijing's local rules and the three open questions
• Tencent News: Wuhan draft rules and the Hangzhou guarantee precedent
• Tide News: effects on the Zhejiang market after one month
• Hangzhou News: September market data
• NetEase: Hangzhou's first residential land listing after the reform
• NetEase: from rescuing projects to building a system
• 21st Century Business Herald: key points of Beijing's rules
• Sina: Beijing's implementing opinions on presale, escrow and development loans
• Sina: Beijing and Shanghai set the template for the 8·28 rules
• NetEase: Beijing's rules, five project types and the funding rules
• Sohu: one month on, developers race for completion filing

This commentary is personal opinion, not investment or legal advice.