China property sector’s transition to a completed-sales model Report Interpretation

Overview

Nomura examines China’s 28 August housing-policy package, which restructures the sales and financing model toward completed-home sales. The report considers the reform structurally positive for delivery confidence but highlights near-term funding stress for developers and greater risk-bearing by banks and capital markets.

Core views

China’s housing and financial regulators released eight documents on 28 August to reform housing development, financing and sales. The central change is a move away from the presales model toward completed-home sales. Nomura argues that this should largely remove the risk of overdue home delivery and rebuild buyer confidence over the long run. The trade-off is that commercial banks, capital markets and developers will absorb more of the financial risk previously carried by homebuyers. The transition is substantial because presales remained the dominant model, accounting for 68% of new-home sales by floor space in 2025. Under the old arrangement, buyers paid in full and began mortgage repayment before completion, enabling developers to access sales-related funds early but exposing buyers to delivery risk. Presale-related funds—including advance deposits, down payments and mortgage loans—still accounted for about 45% of property-development funding. Under the new rules, mortgage disbursement to developers for presale homes moves from structural topping-out to completion filing, effectively removing presales as a construction-financing tool. Nomura expects development loans to become the dominant funding channel for construction. The proposed model is project-focused: each project has one lead bank, potentially leading a loan syndicate, and development loans, project equity and sale proceeds flow through a closed-loop account at that bank. The lead bank and account generally cannot change before full repayment. Loan terms are aligned to the construction and sales cycle: presale projects can receive loans for up to five years, generally no more than three years, while completed-sales projects can receive up to seven years, generally no more than five years—an explicit extension from the previous five-year cap. However, first principal repayment is only required after completion, so banks may receive only interest during construction and face meaningful project-selection and principal-repayment risk. Capital-market funding is intended to supplement bank lending. The CSRC framework supports refinancing by listed developers, including private placements and targeted convertible bonds, and supports property-related asset M&A. It also supports bond issuance by developers of all ownership types, CMBS and real-estate ABS backed by stable-yielding projects, credit-enhancement tools, rental-housing and urban-renewal REITs, and a cautious advance of commercial-property REITs. Nomura views these channels as potential mitigants to the larger financing burden placed on banks, rather than a replacement for development loans. The sales-system reform also raises the presale threshold to topping-out, requires down payments and mortgage proceeds to enter escrow accounts, and introduces a deposit scheme for completed sales. Buyers can sign a contract specifying the deposit, home price, delivery date and breach responsibilities; if delivery fails, they can cancel and receive the deposit back, with penalties for the developer. Nomura believes this could help banks assess project quality when approving development loans, although setting deposit amounts and terms that accurately reveal genuine housing demand remains difficult. The package includes credit easing for households. Maximum mortgage maturity rises to 40 years from 30 years, lowering monthly payments for a given loan size but increasing total interest paid. Borrowers with temporary income loss may negotiate deferred repayments, maturity extensions or deferred principal; extensions cannot exceed half of the original term and total maturity cannot exceed 40 years. Nomura says this may ease temporary financial strain and reduce distressed property sales, though it is likely to have limited effect on generating additional home purchases. The report suggests temporary interest subsidies could make the measure more effective. Household leverage parameters also change: the total debt-to-income ceiling rises to 60% from 55%, while the monthly mortgage payment cap remains 50% of income. Nomura characterizes this mainly as a recalibration of household leverage tolerance rather than pure property easing, because the unchanged 50% mortgage cap remains binding for borrowers without other debt. The change primarily helps buyers also servicing auto loans, consumer credit or credit-card debt. Finally, regulators created a dedicated urban-renewal project-loan category with defined eligibility, use-of-proceeds, repayment-source and fund-management rules. Nomura interprets the measure as evidence of Beijing’s increasing concern about deepening declines in property investment and its use of urban renewal as an investment-stabilization lever. The report cautions that the loan’s eventual scale and execution remain unclear. Overall, Nomura sees more structural long-term benefit than near-term impact: private developers may be too financially stretched to shift smoothly to the new model, and Beijing may still need to address the substantial nonperforming debt created by the past five years of property distress.

Analysis framework

The report first contrasts the existing presales system with the completed-sales model, then traces how delayed mortgage disbursement changes developer funding. It assesses the replacement role of project-based development loans and capital-market financing, before examining household mortgage measures and urban-renewal lending through their effects on affordability, leverage, investment and financial risk.

Methodology notes

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Property financing and risk transmission across homebuyers, developers, banks and capital markets

  The report explains how postponing mortgage disbursement removes early buyer funding from construction, requiring development loans and market financing to take its place and reallocating delivery and credit risks among participants.

• Industry AnalysisVolume-price decomposition

  Use of funding composition and sales-model shares to assess financing dependence

  Nomura uses the 68% presale share of new-home sales and the roughly 45% contribution of presale-related funds to development financing to show why the policy materially changes the sector’s funding structure.

Key data

• Presales share of new-home sales68%Share by floor space in 2025.
• Presale-related share of development fundingAbout 45%Includes advance deposits, down payments and mortgage loans.
• Maximum mortgage tenor40 years from 30 yearsLonger amortization lowers monthly payments but increases total interest.
• Total debt-to-income ceiling60% from 55%Monthly mortgage payment cap remains 50% of income.
• Completed-sales development-loan tenorUp to 7 years, in principle no more than 5 yearsExtended from the previous cap of 5 years.

Impact & implications

Nomura sees the policy as a long-term institutional reform that can improve home-delivery assurance and buyer confidence. In the near term, it shifts funding and credit risk toward developers, banks and capital markets; financially stretched private developers may face the hardest transition, while the effectiveness of urban-renewal lending depends on its scale and implementation.

Risks

• Financially stretched private developers may struggle to transition smoothly to the completed-sales model and could face worsening conditions.
• Banks face greater difficulty assessing project quality and may receive only interest during construction while principal repayment is deferred until completion.
• Mortgage extensions lower near-term payment pressure but can increase total interest payments.
• The scale and execution of the dedicated urban-renewal loan remain unclear.
• Beijing may still need to address substantial nonperforming debt resulting from the past five years of property-sector distress.

What to watch

• The scale and implementation of the dedicated urban-renewal project-loan program.
• Whether temporary interest subsidies are introduced to improve the effectiveness of mortgage-relief measures.
• How private developers manage the transition from presale funding to development-loan financing.