China reforms real estate credit with 40-year mortgage limit

China has introduced a significant overhaul of its real estate credit management system to foster a new development model. On August 28, the People's Bank of China and the National Financial Regulatory Administration issued guidelines to optimize development and personal housing loans.

Key changes include extending the maximum term for personal housing loans from 30 to 40 years to increase borrowing capacity and ease monthly payment pressures. For developers, the duration of development loans will be extended from three years to between five and seven years. The new policy also encourages the sale of completed homes (ready-to-move-in) rather than pre-sales to mitigate the risk of unfinished projects.

To enhance oversight, the reform establishes a system where a single lead bank is assigned to each real estate project, ensuring loan coverage from commencement to completion. Pre-sale funds will also face stricter supervision through mandatory escrow accounts. While intended to decouple developer risks from buyer funds, analysts note that the policy primarily addresses financing and sales structures rather than deeper issues of local government fiscal reliance on land sales and existing debt.