China Reshapes Real Estate Finance in Landmark Reform

China has rolled out its most sweeping overhaul of real estate finance in decades, extending the maximum mortgage term to 40 years and shifting loan disbursement to after a home is completed — a structural reset of the rules governing how the country builds, sells and finances housing.

The package, unveiled on 28 August by the People’s Bank of China (PBOC) and the National Financial Regulatory Administration (NFRA), was accompanied by a joint notice on housing sales reform from the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources and the NFRA, and a parallel set of measures from the China Securities Regulatory Commission (CSRC) aimed at capital markets support, according to CCTV.

A commentary published in the People’s Daily and carried by Xinhua News described the moves as a systematic reshaping of the real estate financial system that opens “four dimensions of space” — leasing supply, urban renewal, revitalization of existing stock, and corporate consolidation.

A 40-Year Mortgage — and a New Disbursement Rule

The most visible change is the extension of the maximum individual housing loan term from 30 years to 40 years — the first adjustment of its kind since 1999, when the ceiling was raised from 20 years. Under the new rules, the specific term is to be negotiated between the buyer and the bank.

Equally significant, according to the PBOC and NFRA, is when the money is handed over. For pre-sale projects, mortgage lending must now occur strictly after the project passes completion filing, rather than at the earlier stage of structural topping-out. For completed-home (“ready-to-sell”) projects, loans are disbursed after the sale is filed. The stated goal is to ensure buyers “get the home first, then repay the loan” — a direct response to years in which purchasers kept paying mortgages on projects that stalled or never finished.

To prevent diversion of funds, the package establishes a “lead bank” (zhuban yinhang) system. A single real estate project is matched with one lead bank that holds all project-related funds — development loans, own funds and completed-home sales proceeds — in a closed account that cannot be changed until loans are settled.

Development loan terms were also differentiated by sales model: generally up to three years and a maximum of five for pre-sale projects, versus generally up to five years and a maximum of seven for completed-home projects.

From Off-Plan Selling to “What You See Is What You Get”

The companion notice on housing sales seeks to accelerate a shift away from the pre-sale system, under which developers sell unfinished homes to raise capital. Newly transferred-land projects and those that have not yet obtained a construction planning permit are to prioritize completed-home sales, while projects already holding permits are encouraged to follow suit. The reform is to be phased in with a “new-old divide,” avoiding a one-size-fits-all approach.

The policy has been framed as delivering “what you see is what you get.” As the 21st Century Business Herald reported, Li Yujia, chief researcher at the Urban Housing Policy Research Center of the Guangdong Provincial Institute of Urban and Rural Planning, said the share of completed-home sales nationwide has risen from 10.2% in 2020 to 32.4% in 2025. Yan Yuejin, vice president of the Shanghai E-House Real Estate Research Institute, told the paper the longer mortgage term, combined with already-low down payments and mortgage rates, creates a “three-low” environment — low down payment, low rate, low monthly payment — that eases pressure on households.

Financial Engineering to Unlock Locked-Up Capital

The CSRC’s twelve-point opinion, summarized by Wall Street CN, sets out how capital markets will support the new model. It endorses refinancing by listed developers, mergers and acquisitions of real estate assets using shares, directional convertible bonds and cash, and greater use of corporate bonds, commercial mortgage-backed securities (CMBS) and real estate asset-backed securities (ABS).

The CSRC also backs real estate investment trusts (REITs) built on eligible rental housing and urban renewal projects, and calls for steadily advancing commercial-property REITs. Underpinning all of this is a philosophical shift: real estate financing should move “from reliance on entity credit to a project-based approach,” meeting the reasonable funding needs of developers of all ownership types on equal terms.

New lending instruments reinforce the same logic. A dedicated “urban renewal project loan” category is introduced, while rental housing gets long-term support — group purchase loans for rental housing run up to 30 years and up to 80% of a property’s appraised value. The rules bar banks from lending for land-transfer payments and related taxes.

Analysis: Relief With Strings Attached

The reform is best understood as an attempt to break two linked pathologies: the transfer of development risk onto homebuyers through the pre-sale system, and a financing framework heavy on pumping money in but light on getting it back out.

For buyers, the headline benefits are real. A 1-million-yuan, 30-year mortgage at 3% carries a monthly payment of roughly 4,216 yuan; at 40 years, that falls to about 3,580 yuan — a saving of some 636 yuan a month, or about 15%. But total interest over the life of the loan rises by roughly 200,000 yuan, and a 40-year term taken at 30 means repayments stretch to age 70.

For developers, the changes are more demanding than they appear. Delayed disbursement and closed-account management lengthen cash-recovery cycles, undermining the high-turnover, high-leverage model that powered the sector’s boom. The closed lead-bank structure also gives lenders far greater visibility and control. The CSRC’s emphasis on tightening issuance oversight and enforcing delisting, alongside its “four early” mandate for risk — early identification, warning, exposure and disposal — signals that the government is not loosening its guard even as it eases financing.

What to Watch

The pace at which completed-home sales substitute for pre-sales will determine whether short-term supply gaps emerge before demand stabilizes. Watch how quickly the lead-bank structure is implemented on the ground, whether commercial-property REITs scale up beyond pilot levels, and whether the higher total cost of 40-year loans changes household behavior. The reform’s architects have opened space for a healthier market — whether the industry can occupy it without reflating old risks is the open question.