Beijing to ban developers from accepting pre-sale funds

Housing buyers in Beijing will be able to deposit their advance sale payments into an independently supervised account instead of handing them over directly to real estate developers starting December, People's Daily reported on Tuesday.

The new procedure was put in place after the Beijing Municipal Commission of Housing and Urban-Rural Development issued a notice stipulating that advance sale payments must go toward building construction projects, and that real estate developers could not accept the funds directly.

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Beijing has adopted similar procedures in effect in Qingdao, Shijiazhuang and Wuhan cities.

Real estate industry insiders said under the new regulation, real estate developers would face greater pressure to raise capital or be forced to speed up property sales.

Nie Meisheng, director of the chamber of real estate developers under the All-China Federation of Industry and Commerce, believes the procedure indicates the Chinese government is supporting normal real estate development activity, while also calling for sensible controls to prevent developers from blindly acquiring tracts of land.

China set up the housing pre-sale system in 1994 to allow developers to secure ample capital for project construction. But some developers embezzled the funds before buying land or used them for other purposes, which prompted the postponement or cancellation of building projects.