On 19 August 2015, the PRC State Administration of Foreign Exchange, PRC Ministry of Housing and Urban Construction, PRC Ministry of Commerce, PRC National Development and Reform Committee, PRC State Administration for Industry and Commerce and the People’s Bank of China jointly promulgated the Notice Regarding the Adjustment of Certain Policies in Respect of Access and Control of Foreign Investment in Real Estate Market (关于调整房地产市场外资准入 和管理有关政策的通知) (“Notice 122”). Notice 122 relaxes certain controls imposed by the Notice Regarding Regulatory of Access to and Control of Real Estate Market by Foreign Investment (关于规范房地产市场外资准入和管理的意见) (“Notice 171”) promulgated by the same six ministries in 2006.

This Update gives a short summary of the salient terms of Notice 122.

Overview of Notice 122

Relaxation of Leverage Ratio 

1:3 leverage ratio for investments greater than USD 30 million

The leverage ratio between registered capital and total investment of foreign-invested enterprises in real estate will be subject to a higher 1:3 ratio if the total investment is more than USD 30 million. This is deemed to be a relaxation from the 1:2 ratio imposed by Notice 171.

Changes to Onshore Borrowing

Onshore loans allowed even where registered capital not contributed in full

A foreign-invested real estate company may borrow onshore loans, offshore loans and convert foreign loans into RMB before full contribution of the registered capital. This means that a foreign-invested real estate company can borrow onshore loans even where its registered capital has not been contributed in full. However, the restriction on a foreign-invested real estate company borrowing foreign loans remains unchanged.

Purchase by Foreigners Living in China

Property can be purchased for selfuse by foreigners living in China

China branches and rep offices of a foreign company/entity and foreigners working and studying in China may now buy property for self-use/self-occupation. However, it is not yet clear as to what supporting documents are required for such purchase.

Notice 171 will remain in full force and effect except where it is amended by Notice 122.

The relaxation in the controls over foreign investment in real estate resulting from the issue of Notice 122 seems to be quite limited. However, it is believed that this is only the first step taken to adjust the cooling measures put into place eight years ago and more actions will follow soon.