Ministry of Construction, National Development and Reform Commission, Ministry of Supervision, Ministry of Finance, Ministry of Land and Resources, People's Bank of China, State Administration of Taxation, National Bureau of Statistics and China Banking Regulatory Commission, Opinions on the Adjustment of the Housing Supply Structure and Stabilization of Housing Prices

Issued: May 24 2006

Main contents: Starting from June 1 2006, residential premises (including low-priced residential premises) with a unit floor area of less than 90 square metres of any newly-approved or newly-commenced construction of commodity residential premises shall account for at least 70% of the total area of the whole development project (Section One). Business tax will also be levied from June 1 2006 on the entire income gained from the re-sale of residential premises purchased for less than five years. However, business tax will be exempted for re-sale of ordinary residential premises purchased by an individual for at least five years. For re-sale of non-ordinary residential premises purchased by an individual for at least five years, business tax shall be levied on the balance after subtracting the purchase price of the premises from the sales income.
The Opinions also prohibit commercial banks from releasing loans to real property developers that fail to meet loan conditions, for example, if the project capital fails to reach the ratio of 35%. For developers holding relatively abundant idle land or vacant commodity premises, commercial banks shall strictly control their rollover loans or any kind of revolving credit facilities. For commodity premises that have been vacant for at least three years, commercial banks may not accept them as collateral for loans. Also from June 1 2006, the down payment for individual housing mortgage may not be less than 30% of the total amount. Purchase for one's own use of residential premises with a unit floor area of less than 90 square metres is still subject to the existing requirement of a 20% down payment. When formulating annual land use plans, urban people's governments at all levels shall prioritize and guarantee the land supply for low-to-medium-priced and small-to-medium-sized units of ordinary commodity premises (including low-priced residential premises) and low-rent housing, and the annual supply thereof shall not be less than 70% of the total supply of residential land. For land that has not been developed for a year from the contractual construction commencement date, higher fees for idle land shall be imposed in accordance with the law. If the land has not been developed for two years, the leasehold shall be withdrawn without consideration. For land on which construction has commenced according to the contractual date but the construction area developed is less than a third or the invested amount is less than a quarter and the construction has been suspended continuously for a year without approval, it shall be treated as idle land.
Related legislation: Circular on Earnest Stabilization of Housing Prices and Circular on Opinions Concerning Proper Implementation of the Stabilization of Housing Prices