(Yicai) Aug. 31 -- China is pivoting toward sales of move-in-ready homes, with the authorities recently issuing a policy document to drive forward the move from the presales model that has dominated for over three decades. The change is about ensuring that homebuyers get exactly what they see, and transfers the risk of construction and financing from buyers toward developers.

The policy document, jointly issued by the Ministry of Housing and Urban‑Rural Development, the Ministry of Natural Resources, and the State Administration of Financial Regulation on Aug. 28, urges local authorities to prioritize sales of turnkey properties on newly auctioned land and those plots that were already auctioned off but have yet to receive planning permission

In a question-and-answer session posted on the People's Bank of China’s website, officials noted that reforming how new-builds are sold, while simultaneously toughening oversight of presale funds, will help guide builders to develop projects according to their financial capabilities, raise their risk awareness, abandon the “extensive expansion” model characterised by "high debt, high leverage, and high turnover," and eliminate potential risks.

Chinese developers have used the presales model for 32 years. It was established in law in 1994 and subsequently powered the country’s massive expansion in housing stock. But with the property market having been in a five-year slump, millions of pre-sold apartments have been left uncompleted.

For homebuyers, the biggest change will be in the gradual shift from "pay first, receive later" to "what you see is what you get," industry sources told Yicai. For developers, however, having capital tied up in projects for longer will force them to rely more heavily on their own balance sheets and longer-term financing, they pointed out.

The gradual changeover will help optimize consumption patterns on the transaction side and improve product quality and better guarantee sales, Yan Yongjin, vice president of the Shanghai E‑House Real Estate Research Institute, said to Yicai.

China’s housing market is showing tentative signs of stabilizing, mainly in tier-one cities, following a “whitelist” initiative that allows cities to nominate eligible housing projects for bank financing to ensure construction and delivery and policy easing to boost buyer confidence and sales.

“We believe the market is now nearing the bottoming-out stage,” as sales are picking up, Vincent Lo, the chairman of Shui On Land, a Hong Kong-based developer of luxury home projects in the Chinese mainland, said on Aug. 28.

New Way Forward

“The real estate market is entering a new development model underpinned by project‑based financing, completed‑house sales, and closed-loop fund supervision," a veteran industry executive said.

High leverage and turnover constitute normal practice under the presales model, said Cui Ji, executive VP of the Shanghai E‑House Real Estate Research Institute. With the completed‑home sales scheme, developers will face longer capital recovery cycles, raising the bar for their financial strength, operational capacity, and building capabilities, Cui stressed.

Turnkey home sales will facilitate destocking in the new home market in the short term and support the rebalancing of supply and demand over the long term, said Li Yujia, chief researcher at the Guangdong Housing Policy Research Center. Such sales will lengthen the cycle from land acquisition to market launch to some extent, helping curb new supply growth and stabilize price expectations, while giving existing projects more time to clear inventories, Li pointed out.

"In the long run, replacing homogenized off-plan properties with differentiated, high‑quality move-in-ready supply constitutes a lasting strategy for stabilizing the real estate market," Li noted.

Turnkey sales can restore confidence among buyers, according to Zhang Bo, dean of the 58 Anjuke Research Institute. Concerns aired in online discussion on the platform about whether projects can be delivered on time continue to increase, but sales of move-in-ready properties directly address this core anxiety, Zhang said.

“The core competitive strengths of builders will hinge more on delivery capacity and product strength in the future, with the gap between companies in the industry continuing to widen," Zhang pointed out.

Editors: Tang Shihua, Martin Kadiev