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

Overview

Nomura reviews China’s 28 August package to reform property development, financing and sales. The report sees the completed-sales transition as a long-term solution to home-delivery risk, while emphasizing that it shifts financing and credit burdens toward developers, banks and capital markets during a difficult property-market adjustment.

Core views

China’s housing and financial regulators released eight documents on 28 August to overhaul the housing system. The central reform is a decisive move away from the presale model toward completed-home sales. Nomura notes that presales still accounted for 68% of new-home sales by floor space in 2025. Under the former system, buyers paid in full and began mortgage repayment before completion, supporting rapid urbanization but also creating developer leverage and home-delivery risks. Under the new model, buyers begin servicing mortgages only once a home is completed, which Nomura believes should rebuild confidence in delivery over the long run and largely eliminate overdue-delivery risk. The financing mechanics change materially. For presale projects, mortgage disbursement to developers moves from structural topping-out to completion filing. Presale-related funds—advance deposits, down payments and mortgages—still account for about 45% of developers’ construction funding. Deferring release until completion therefore removes presales’ former financing function: developers can no longer use early mortgage proceeds to fund construction. Construction-stage funding must instead come from developer equity, development loans and capital-market channels, transferring more financial risk from homebuyers to developers, commercial banks and markets. Nomura expects development loans to become the dominant funding source. The framework is project-focused and lead-bank based: each project has one lead bank, either lending directly or coordinating a syndicated loan, while project equity, development loans and sales proceeds pass through a closed-loop account at that bank. The lead bank and account generally cannot change before full repayment. Loan terms match the construction and sales cycle, spanning project start to completion filing. Development-loan tenors are up to five years for presales, in principle no more than three years, and up to seven years for completed sales, in principle no more than five years—an explicit extension from the previous five-year cap. Crucially, developers need not make their first principal repayment until project completion; during construction, banks may receive only interest, which Nomura identifies as a meaningful bank risk. Capital markets are intended to share part of the financing burden. The CSRC framework supports refinancing by listed developers, including private placements and targeted convertible bonds for eligible projects, as well as property-asset M&A funded with shares, convertibles or cash alongside supporting fundraising. It also supports bond issuance by developers of all ownership types, rollover refinancing of existing bonds, CMBS and real-estate ABS backed by stable-yielding projects, credit enhancement, rental-housing and urban-renewal REITs, commercial-property REITs and the private real-estate fund pilot. The sales-system reform also raises the presale threshold to topping-out of the main structure, requires down payments and mortgage proceeds to enter escrow accounts, and introduces a deposit scheme for completed-home sales. Buyers can pay a small deposit under a contract setting the price, delivery date and breach responsibilities; authorities oversee deposits until delivery. If delivery is late, buyers may cancel and developers must refund the deposit and bear penalties. Nomura considers this potentially useful for banks assessing project quality, although setting deposit amounts and terms that accurately reveal housing demand remains challenging. The package includes household and developer credit easing. The maximum mortgage maturity rises to 40 years from 30 years, reducing monthly instalments for a given loan size but increasing total interest paid. Borrowers experiencing temporary income loss may negotiate repayment postponement, maturity extensions or principal deferrals; extensions may not exceed half of the original term and the overall term may not exceed 40 years. Nomura believes this could reduce forced selling at distressed prices for temporarily strained households, but likely has limited power to generate additional home purchases. It argues that temporary interest subsidies could make the policy more effective. The policy also raises the total debt-to-income ceiling to 60% from 55%, while retaining the monthly mortgage-payment-to-income cap at 50%. Nomura says the unchanged mortgage cap remains binding for borrowers without other debt, so the change mainly assists households also servicing auto loans, consumer credit or credit-card debt. It characterizes the measure as a calibration of household leverage tolerance rather than pure property easing. Finally, a dedicated urban-renewal project loan category establishes eligibility, permitted uses, repayment sources and fund-management rules. Nomura reads this as evidence of rising official concern about deepening property-investment declines, but says the scale and execution of the facility remain unclear. Overall, Nomura sees more long-term structural benefit than near-term impact. A completed-sales model may strengthen buyer confidence, but financially stretched private developers may struggle to transition and could deteriorate further. The report also says Beijing may still need to address substantial non-performing debt created by the property downturn over the past five years.

Analysis framework

Nomura compares the old presale system with the new completed-sales framework, then traces how the change affects funding flows, bank credit exposure, capital-market financing, buyers’ repayment burdens and property investment. It uses policy terms and funding composition data to distinguish long-term structural effects from near-term transition risks.

Methodology notes

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Transmission of the property-sales reform through homebuyers, developers, banks and capital markets

  The report follows how delaying mortgage disbursement removes early presale financing, requiring developers to use development loans and market financing and shifting risk toward lenders and investors.

• Industry AnalysisSupply-demand framework

  Housing demand and affordability assessment

  Nomura explains how longer mortgage terms, repayment extensions and deposit arrangements may affect monthly affordability, forced sales and the ability of policy changes to support genuine housing demand.

Key data

• Presales share of new-home sales68%Share of new-home sales by floor space in 2025.
• Presale-related construction fundingabout 45%Advance deposits, down payments and mortgages as a share of developers’ funding sources for property construction.
• Maximum mortgage maturity40 years from 30 yearsLonger amortization lowers monthly payments but increases total interest payments.
• Total debt-to-income ceiling60% from 55%The monthly mortgage-payment-to-income cap remains 50%.
• Completed-sales development-loan tenorup to 7 years, in principle no more than 5 yearsExplicitly longer than the previous five-year cap.

Impact & implications

The report says the package changes the allocation of property-sector risk: homebuyers gain greater delivery protection, while developers, banks and capital markets assume more financing and credit exposure. Its near-term effectiveness depends on whether private developers can fund construction, whether banks can assess projects properly, and how the urban-renewal facility is implemented.

Risks

• Financially stretched private developers may be unable to transition smoothly to the completed-sales model and could weaken further.
• Banks face greater project-selection and repayment risk because construction loans may receive only interest until a project is completed.
• Substantial non-performing debt from the past five years of the property downturn may still require policy resolution.
• Longer mortgage maturities improve monthly affordability but increase borrowers’ total interest payments.
• The appropriate deposit amount and terms may be difficult to set in a way that reveals genuine housing demand.
• The scale and execution of dedicated urban-renewal loans remain unclear.

What to watch

• The ability of private developers to replace early presale funding with development loans, equity and capital-market financing.
• Banks’ project-quality assessment and credit performance under the lead-bank, closed-loop funding model.
• Whether temporary interest subsidies are introduced to improve the effectiveness of mortgage easing.
• The scale, implementation and take-up of dedicated urban-renewal project loans.
• Whether the completed-sales model restores homebuyer confidence and reduces forced selling at distressed prices.