Draft China property rules curb foreign buying

SHANGHAI - China, concerned that surging foreign investment in its real estate is fuelling speculation and pushing up prices, has prepared draft rules restricting foreign purchases of property.

Among other things, the rules would require foreign institutions or individuals buying Chinese property that was not for their own use to set up a China-registered company to handle the purchase. Minimum capital requirements would be imposed on such companies making larger purchases.

The draft, prepared by central government bodies and seen by Reuters on Friday, is expected to be discussed by local governments and regulators before the central government announces a final version of the rules at the end of this month or early next month, real estate industry sources said.

Other major rules in the draft are:

- Foreign-funded property firms investing more than US$10 ($16.39) million would need to have registered capital of no less than 50 per cent of the investment.

- Investors found to be trying to drive up property prices would be prosecuted.

- Foreign companies or individuals would not be allowed to buy residential housing that was not for their "own use or own habitation". The draft does not define this phrase.

- Investors with registered capital of less than 35 per cent of the total value of a project, or which failed to obtain a land-use certificate, would not be allowed to take out loans with domestic or foreign lenders.

- Partners in foreign-funded property firms would not be permitted to guarantee fixed returns.

- Transfers of projects or stakes in foreign-funded property firms, or their acquisition of domestic property companies, would need to be approved by the government.

- REUTERS