People's Bank of China, Further Strengthening the Administration of Real Property Credit Business Circular

Issued: June 5 2003

Main contents: Item One concerns real property development loans. Real property loans should mainly support the residential property projects suitable for medium- and low-income families. Loans given to projects for large or luxury commodity premises should be limited. Commercial banks shall not release any types of loans to a project that has not yet obtained leasehold certificates, construction land planning permits, construction project planning permits or construction work permits. Loans to real property developers can only be released in the form of real property development loans. Release of loans in the form of real property development working capital loans or other forms of loans is prohibited. The self-owned funds (owner's equity) of a real property developer shall not be lower than 30% of the total investment amount of the real property development project. Real property loans can only be used within one's own region and are prohibited from being used in other regions.
Item Two deals with land reserve loans. Loans to land reserve organizations shall be secured loans and the amount may not exceed 70% of the appraised value of the land to be acquired for a term of not more than two years. Commercial banks shall not grant loans to real property developers for the payment of leasehold fees. Item Three concerns working capital loans for construction enterprises. Such loans should be used only for purchase of machinery necessary for construction. If such loans are misappropriated, the borrowing bank should retrieve the appropriated funds within a specified time limit and inform other commercial banks of such illegal acts of the enterprise to prevent similar credit support to the enterprise. Commercial banks should also strictly prevent the use of bank loans by construction enterprises to finance their advance payments for real property development projects. Item Four stipulates that commercial banks can only grant personal home loans to individuals for residential buildings whose main structure has been topped out. For first-time home buyers for self use, the ratio of the first instalment is 20% and the ratio should be raised appropriately beginning with the second purchase. The loan-to-value ratio of a mortgage loan for a commercial unit may not exceed 60% and the mortgage term may not exceed 10 years. The commercial unit to be purchased must be a completed, examined and accepted structure (Item Five).
Related legislation: Strengthening the Macro-economic Control of the Real Property Market and Promotion of the Healthy Development of the Real Property Market Several Opinions, 2002; Administration of the Loans to Land Reserve Organizations Procedures and People's Bank of China, Strengthening the Administration of Credit Business for Housing Common Reserve Circular, 2002