Foreigners must provide documentation to purchase property
December 14, 2010 | BY
Candice MakNew rules enforce compliance with existing restrictions
Although a recently released circular does not provide any new restrictions to foreigner housing purchases – they are still only allowed to buy one flat for their own use – it does stipulate extra measures the government is requiring to regulate the market.
David Blumenfeld, a Shanghai-based real estate partner at Paul Hastings Janofsky & Walker said: “It's not that there are new rules but, rather, that the government is requiring that buyers make submissions that allow the government to better monitor compliance with the existing rules.”
On November 15, the Ministry of Housing and Urban Rural Development (Mohurd) and the State Administration of Foreign Exchange (Safe) issued a notice reiterating its restriction on housing purchases by foreign individuals or foreign companies, the Circular on Further Regulating the Administration of Premises Purchases by Overseas Organisations and Individuals (关于进一步规范境外机构和个人购房管理的通知) (Circular 186).
When buying a new home, foreign buyers (excluding those from Hong Kong, Macau and Taiwan) must now provide proof of having worked in China for at least one year before the purchase and provide a written statement proving they do not own any other properties in the country.
Foreign buyers from Hong Kong, Macau or Taiwan need to provide documentation to confirm they are working, studying or residing in China in order to purchase a home.
Circular 186 also clarifies in its language that foreign companies operating in China are restricted to buying one commercial property for self-use and cannot purchase any more for investment or residential use. Also, they can only make these purchases in the city where they are registered. Previous regulations did not ban foreign companies from buying residential real estate for private use.
Blumenfeld points out that Circular 186 is a reiteration of the existing Circular 171 restrictions from July 2006. “It seems that this is another signal to the market of the government's intent to do what it believes is necessary to cool down the market,” he said.
Circular 186 should not cause concern for those overseas real estate investors who do transactions that require Ministry of Commerce (Mofcom) approval. The notice does not appear to change the rules applicable to them, notes Blumenfeld. “The Circular appears to be focused on assuring compliance with the existing rules by individual and branch or representative office buyers that are not required to receive such Mofcom approval,” he said.
Deals requiring Mofcom approval include foreign purchases of an office building, apartment building, retail centre, hotel, or other such properties, and cannot be registered with the Land Bureau without prior approval from the regulator.
“In practice, a foreign purchase of an individual apartment would not go through the Mofcom approval process,” said Blumenfeld. “There is nothing in the new Circular to indicate that there is any impact upon a foreign real estate investor that has received a specific approval for a given real estate investment.”
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