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China adjusted restriction policies on foreign investment in real estate market

11 September 2015
On 19 August 2015, 6 PRC governmental departments (including Ministry of Housing and Urban-Rural Development, Ministry of Commerce, National Development and Reform Commission, People's Bank of China, State Administration for Industry & Commerce and State Administration of Foreign Exchange) jointly issued "Notice on Adjustment of Related Policies regarding Market Access and Administration of Foreign Investment in Real Estate Market (the "Notice"), whereby the restriction policies on foreign investment in the real estate market have been adjusted as follows:
1 The Notice has reduced the requirement on the amount of the registered capital of foreign invested real estate enterprises. As from 2006 when China started implementation of the restriction policies on foreign investment in the real estate market, if the total amount of investment of a foreign invested real estate enterprise is or above USD10 million, the registered capital of the said enterprise should not be less than 50% of its total amount of investment. According to the newly issued Notice, where the total investment of a foreign invested real estate enterprise is above USD10 million up to USD30 million, the registered capital of such enterprise can be as less as 40% of the total amount of investment and no less than USD5 million; where its total amount of investment is above USD30 million, its registered capital can be as less as one-third of the total amount of investment and no less than USD12 million.
2 Before the Notice is issued, one of the requirements for a foreign invested real estate enterprise to borrow a domestic or a foreign loan, or to carry out exchange settlement for a foreign exchange loan was that the registered capital of such enterprise should have been fully paid up, but such requirement for full payment of registered capital has been cancelled by the newly issued Notice. Nevertheless, according to the existing policy, if a foreign invested real estate development enterprise obtained its approval certificate and completed the required filing procedures with Ministry of Commerce on or after 1 June 2007, such a foreign invested real estate development enterprise has not been allowed to borrow a foreign loan or to carry out the exchange settlement for a foreign exchange loan, and this existing policy has not been changed by the newly issued Notice.
3 According to the Notice, foreign companies' or organizations' branches and the representative offices (except for those approved to operate real estate business), and foreign individuals working or studying in China, may, based on their actual needs, purchase commercially developed real properties for their self-use. As for purchase of residential properties by foreign individuals, before the new Notice was issued, only the foreign individuals who had worked or studied in China for more than one year were qualified to purchase, and the newly issued Notice has cancelled such qualification requirement. Nevertheless, the Notice provides that if a foreign individual purchases a residential property in a city that implements its local restriction policies on real property purchase, such purchase by the foreign individual shall be subject to such local restriction policies.

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