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Buying Real Estate in China as a foreigner
07/09/2015

China Real Estate - foreigners buying real estate

In previous decades, the Chinese real estate market has been a key driver of domestic growth. As new constructions create a huge demand for steel, concrete and other raw materials, they actively boost the economy. Since 2014 however, the sector has slowed down, reflecting overbuilding capacity across many cities. Among several measures taken to revitalize the industry, the Chinese government has recently announced its plan to lift restrictions on foreign individuals and companies buying real estate in China.

1. Former Regime

Until now, foreigners wishing to acquire Chinese real estate were subject to the following limitations:

-  to have worked or studied in China for at least one (1) year, while foreign-invested companies were required to have carried on activities in China for at least one (1) year;

- only acquire one (1) property in China;

- such property could only be acquired for personal use, meaning dwelling purposes for individuals (no renting) and commercial use for companies;

- companies applying for a loan (either domestic or overseas) to purchase real estate were required to  have paid up their registered capital entirely; and

- to invest in projects over USD ten (10) million, foreign-invested real estate companies were required to have a paid-up registered capital equal to at least fifty percent (50%) of their total investment.

2. New Rules

On August 27th, 2015, the Chinese government officially released its plan to relax investment rules for property acquisition by foreign individuals and institutions. Accordingly, the following limitations have been lifted:

- foreign individuals and companies are now allowed to buy properties regardless of how long they spent or carried on business within the territory;

- foreigners can buy as many properties as they want;

- companies applying for a real-estate mortgage are no longer required to have entirely paid-up their registered capital; and

- foreign-invested real estate companies are required to  have a registered capital representing forty percent (40%) of their total investment for projects of between USD ten (10) million and USD thirty (30) million, and thirty percent (30%) of their total investment for projects over USD thirty (30) million.

The relaxation of these rules can  be limited by local purchase restrictions. For instance, in Shanghai and Beijing, foreign buyers can only acquire one (1) property. In other cities, tax receipts and/or proof of payment of social contributions might also be required. Further, the property must be acquired for self-use.

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Today, foreign buyers represent less than 1% of the real-estate market in China, so the current impact of these new rules might be limited.

In addition, while investing in real estate in China, foreigners should bear in mind that ultimate ownership of land rests with the Chinese government and that property owners are only granted a 70 year lease/land-use rights over a residential or commercial property. Hence, if the land is to be used for public benefit or redeveloped, the Chinese government is entitled to make a compulsory purchase of the property. While compensation is paid, it is not necessarily up to the original amount invested.

 

For more information on services for all stages of market entry and expansion in Hong Kong, China and Asia in generaly provided through Rosemont (Hong Kong) Ltd please see: http://www.rosemont.hk or contact Anne de Roulhac at a.deroulhac@rosemont.hk