Information for foreigners purchasing real estate in China
Relevant laws and regulations
According to the article 3 of announcement from the ministry of housing and urban-rural development, the ministry of commerce, the national development and reform commission, the people’s bank of China, the state administration for industry and commerce and the state administration of foreign exchange that is about the adjustment of the real estate market, foreign capital, related policies and the management, branches or representative offices established within the territory of China by foreign institutions are able to purchase commercial or private houses that conform to the actual demand for use, except those who are approved to engage in real estate business.
Overseas individuals who work or study in China may purchase commercial houses for their own use and live in accordance with their actual needs. For the cities that implement the housing purchase restriction policy, the purchase by an overseas individual shall conform to the local policies and regulations. The restriction of working and studying for a full year was abolished recently. According to the article 1 of the announcement from the ministry of housing and urban-rural development and the state administration of foreign exchange on further standardizing the administration of house purchase by overseas institutions and individuals, overseas individuals can only buy one set of housing for self-use in China. Foreign institutions that establish branches or representative offices in China can only purchase non-residential houses which are needed for office work in registered cities. Unless otherwise provided by laws and regulations.
At present, the announcement on further standardizing the management of overseas institutions and individuals purchasing houses in China (construction no. 186 ) is implemented by government. The relevant management of overseas institutions and individuals purchasing houses is as follows:
- You can only buy one house for self-use. An overseas institution that has set up a branch or representative office in China can only purchase non-residential houses needed for office work in the registered city (unless otherwise stipulated).
- Foreigners shall check relevant materials and verify the situation of the house holder when registering the property right of the house. In addition, the following materials shall be provided:
- Certificates issued by relevant departments which are about overseas individuals (excluding Hong Kong, Macao and Taiwan residents and the overseas Chinese) have been working in China for more than one year;
- The written commitment that there is no other housing in China under the name of the overseas individual.
- The purchase and settlement of foreign exchange shall be implemented in accordance with the announcement on issues related to the regulation of foreign exchange management in the real estate market (huifa  no. 47) : the application materials submitted shall be examined and registered immediately in the foreign exchange management information system of the safe office for direct investment if they meet the requirements.
The power of attorney of a foreign legal person, other organization or individual shall be notarized, and the notarized documents in a foreign country shall be authenticated by the Chinese embassy or consulate in that country.
Latest development trend
As the economy develops, more foreign capital enters the Chinese market. The demand of foreigners for real estate keeps growing and the policies on foreigners purchasing houses are being adjusted at any time. Then, what changes are made in 2019? Some of the policy adjustments include foreign-invested real estate enterprises, overseas institutions and individuals buying houses. The adjustment details are as follows:
- The proportion of registered capital and total investment of foreign investment shall be implemented with reference to the interim provisions of the state administration for industry and commerce on the proportion of registered capital and total investment of sino-foreign joint ventures (industrial and commercial enterprise  no. 38);
- Cancel the policy that “foreign-invested real estate enterprises must pay all the registered capital to settle foreign exchange for domestic loans, overseas loans and foreign exchange loans”;
- Branches and representative offices set up in China by overseas institutions (except enterprises approved to engage in real estate business) and overseas individuals working or studying in China may purchase commercial houses that meet the actual needs for self-use. If it is a city with purchase restriction policy, foreigners should abide by the local purchase policy;
- Relevant departments have further simplified procedures, improved efficiency, optimized and improved management of foreign-invested real estate. Foreign businessmen can directly go to the bank for foreign exchange registration.
In addition, for the foreign institutions and people buy commercial housing in China, the lawyer should also according to the opinion promulgated in July 11, 2016, by the ministry of construction, ministry of commerce, national development and reform commission, the people’s bank of China, the state administration for industry and commerce, the state administration of foreign exchange which is about the foreign investment access and management of normative estate market regulation(built housing  171), and combined with local specific policies. Attentions need to be paid to the following two aspects:
- Foreign institutions and individuals must adopt a real-name system when purchasing commercial houses for their own use.
- In addition, the applicant shall go to the land and real estate departments to handle the registration procedures of the right to use land and the property right of houses on the strength of valid certificates (overseas institutions shall hold the certificates approved by the relevant departments of the Chinese government for the establishment of domestic institutions, and overseas individuals shall hold the certificates approved by the Chinese government for working and studying in China, the same hereinafter). Real estate property right registration departments must handle the property right registration of overseas institutions and individuals in strict accordance with the principle of self-use and self-residence, and shall not register those who do not meet the requirements.
The required material
As for the materials that foreigners should provide for the purchase of houses, 17.4.4 of the guidance on the operation of legal services for commercial housing sales contract provided by lawyers of the China lawyers association stipulates that when the buyer is a foreign citizen or legal person:
- Foreigners: passport and alien residence certificate (Chinese version of passport notarized by Chinese notary office if no alien residence certificate is available);
- Overseas legal persons (including Hong Kong, Macao and Taiwan) and other organizations (including Hong Kong, Macao and Taiwan) : business registration form of legal persons or other organizations or documents approving the establishment of legal persons and other organizations; The company registration documents of the foreign legal person or other organization shall be notarized at the place of registration and certified by the Chinese embassy or consulate in that country.
In addition, if the income certificate of a foreigner is not from the place of purchase, the foreigner shall also provide a notarization of the authenticity, the guarantor of the place of purchase and a Chinese translation of the foreign language certificate.
It is worth mentioning that when foreigners buy houses in some cities in China(such as Beijing) that have mature regulations on the purchase of houses by foreigners, they need to provide the “examination and approval form for renting and selling houses to foreign personnel and institutions in Hong Kong, Macao and Taiwan”, namely the approval form for foreign affairs. The documents of approval for foreign affairs mainly include a copy of the property ownership certificate, a copy of the seller’s own identification certificate, the original and a copy of the buyer’s identification certificate, and the passport with a notarial certificate of the Chinese translation of the passport from foreigners. The approval form is filled in by the relevant provincial and municipal government service center, and then the foreign-related government agency at the same level is going to seal and approve, then the approval form is retrieved. The whole process takes 5-7 working days.
At present, foreigners and mainlanders are basically similar in the process of purchasing real estate, with the exception that the purchaser needs to go through the approval procedure at the foreign approval office before purchasing a house. The specific process is as follows:
- The buyer and seller sign the purchase and sale contract with the economics;
- The purchaser shall go to the foreign approval office for approval;
- The buyer and seller submit the relevant materials of transfer;
- The buyer and seller go through the procedures for the transfer of house property rights;
- Get house title certificate.
For foreigners, the second and third categories need more attention.
The history of land ownership in China
In China, land ownership cannot be bought or sold. There are two kinds of land properties in China: state ownership and collective ownership. Ownership of both types of land cannot be bought or sold. So-called government open bidding refers to the transfer with compensation of state-owned land use rights by the government.
The transaction of land as a commodity is the act of transferring the ownership of land to others. In the clan land ownership, the land within the clan or village community is occupied and used by the village community, and there is no land trading activity. In the slave society, although the ownership of land by slave owners often took different forms in different countries, regions and times, the land could not be bought, sold or transferred.
Capitalist land ownership is the most complete and typical form of private ownership of land, that is, land can be sold, rented or managed by itself. In the process of capitalist economic development, on the one hand, farms are polarized. Some farms go bankrupt in competition and are forced to sell their land, the winning farms were expanded by buying land. On the other hand, land speculators, non-agricultural companies are also in the land business. In capitalist society, land has become an important commodity in the market.
The ownership of land in Chinese slave society was that of slave owners. The land owners had only the right to use, and could buy, sell, rent, mortgage, give as gifts or operate by themselves. Land sales in China’s feudal society content is complex, various forms, there are “Live sale” and “Dead seal” .”Live sale” means that the seller reserves the right of redemption, but the right of redemption is reserved for a certain period of time. Overdue but no redeem, becomes “Dead seal” namely. “Pawn fields” is a way of “Live sale”. Farmers who want to retain their land foreclosure often receive cash from pawn their fields. The premium paid for foreclosed farmland sale is little. The sale and purchase of land in China’s feudal society was generally based on the feudal natural economy which did not indicate a developed commodity economy, but merely a means by which landlords and rich peasants acquired the land of peasants. After the establishment of socialist public ownership of land, land trading activities were strictly restricted.
In China, the law forbids the sale of land. On April 12, 1988, the amendment to the constitution of the People’s Republic of China was adopted at the first session of the seventh National People’s Congress. No organization or individual may seize, buy, sell or illegally transfer land by other means. The right to the use of land may be transferred in accordance with law. Article 2 (2) of the general provisions of the land administration law of the People’s Republic of China also stipulates that no unit or individual may seize, sell or illegally transfer land by other means. The right to the use of land may be transferred according to law. In some rural areas of China, there are still land sales phenomenon, which is illegal; Some normal land transfers are also called “land sales”, which is a misnomer. Land transfer shall be carried out in strict accordance with legal procedures. A land transfer contract must be signed to clarify the rights and obligations of the relationship, the transfer period, the transfer area and the liability for breach of contract.
For more information please contact:
Monika Rutland, partner
rutland & partners, advokátní kancelář s.r.o.
tel: +420 226 226 026