(Yicai) July 23 -- Guangzhou will "steadily promote a completed houses selling" scheme within five years, with the southern Chinese city gradually eliminating the presale model to achieve a "what you see is what you get" effect for homebuyers.

The five-year development plan draft for housing construction in Guangzhou, released by the local Housing and Urban-Rural Development Bureau recently, requires the real estate market to achieve a smooth and orderly transition from the old to the new business development model. The city will select suitable projects in a timely manner to experiment with the move-in-ready homes sales model.

To encourage developers to participate in the pilot, the local government will urge commercial banks to hike the upper limit of loans and provide interest rate discounts to real estate projects under the new scheme. In addition, it will allow such developers to make land payments in installments while also providing them with public resource support.

Guangzhou's new sales model will be a clear direction for the future development of China's real estate market, Li Yujia, chief researcher at Guangdong Housing Policy Research Center, told Yicai. Buyers have increasingly high demand to see what they get and are more concerned about the quality of houses than ever before, so the scheme can precisely respond to these concerns, Li stressed.

The move will also help change the business growth model that developers have been using, involving high turnover and maximizing development scale, as well as extend the supply cycle of new houses and alleviate the problem of too fast growth in new homes supply in some areas, Li pointed out.

However, it is unlikely for the scheme to be fully implemented throughout Guangzhou immediately, Li noted, adding that the city will likely select some projects in areas with a high supply of new houses and prominent downward pressure on home prices as test grounds, offering preferential policies to developers participating in the pilot.

New homes in China are usually sold under the presale model, where developers can start selling houses after obtaining a presale certificate from the government. The benefit of this model is that it can help builders raise money to accelerate construction, but the disadvantage is that homebuyers only see a construction blueprint, increasing the possibility of sales disputes.

In extreme cases, some developers embezzle the money homebuyers have paid for presale houses, resulting in unfinished properties and customers waiting a long time to receive what they paid for.

Editors: Tang Shihua, Martin Kadiev