Recent policy updates from regulators are prompting banks to overhaul their credit approval, capital management, and risk control systems, according to a housing finance executive at a major state-owned bank. The People's Bank of China and the National Financial Regulatory Administration jointly issued guidelines designed to reform real estate credit management and accelerate the formation of a new development model for the property sector. These guidelines, together with specific management rules for personal housing loans, commercial housing development loans, and commercial real estate loans, establish the institutional framework for real estate credit under the new paradigm. Industry experts say this policy package targets three key objectives: protecting homebuyer rights, addressing developers' financing needs, and strengthening financial risk controls. The measures are expected to improve the real estate credit system, safeguard buyer interests, support reasonable financing demands, and promote stable market performance.
The revised rules on loan disbursement timing have drawn significant attention. According to the guidelines, for purchases of completed homes, lenders must disburse loans after the sales filing is finalized. For purchases of pre-sold properties still under construction, loans can only be released after the completion filing is recorded. This shift to ensuring buyers "get the keys before repaying the loan" marks a fundamental change to credit practices under the pre-sale model. Previously, banks could initiate project approvals, client reviews, and loan disbursements once the main structure was topped out, meaning borrowers often began making payments while construction was still underway. The new requirements mean financing is only provided after the relevant filing milestones are met, sharply reducing the risk of buyers owing money on homes that may never be delivered, the banking executive explained.
Yan Yuejin, deputy director of the Shanghai E-House Real Estate Research Institute, noted that the old "disburse upon structural completion" principle sometimes led to even earlier loan releases in practice. This created a problematic dynamic where buyers took on repayment obligations years before project completion. In cases of work stoppages or unfinished developments, borrowers faced the dilemma of continued loan payments without receiving their properties. While banks historically benefited from locking in credit returns earlier, buyers bore the interest burden sooner and faced considerable delivery uncertainty. The new policy shifting disbursement later carries strong directional significance. Essentially, it transfers delivery risk from buyers and lenders to developers, compelling them to fulfill their construction responsibilities and preventing scenarios where funds are fully deployed yet projects remain stalled. Overall, delaying disbursement protects homebuyers and encourages developers to better manage cash flows, adjust sales pacing, and transition from high-leverage models toward more sustainable development approaches.
The state-owned bank executive acknowledged that the new policy will fundamentally reshape mortgage business timelines and project admission procedures. With pre-sale project disbursement delayed until after completion filing, banks face longer mortgage repayment cycles and altered asset deployment schedules. Project admission will now place greater emphasis on a development's ability to reach completion and delivery, with heightened weight on front-end risk assessment. Another widely discussed change extends the maximum personal housing loan term from 30 to 40 years. The guidelines stipulate that lenders must adhere to minimum down payment ratios, with loan terms capped at 40 years and amounts not exceeding the appraised value of the purchased property.
Field research at multiple banks indicates some are already accepting applications under the new rules. A personal loan officer at China Construction Bank said that for existing mortgages, the bank will evaluate each customer's reasons for seeking an extension, repayment sources, and future repayment arrangements before determining the adjusted term. Under the regulations, the extension cannot exceed half of the original loan term, and the combined total cannot surpass 40 years. A customer service representative at Industrial and Commercial Bank of China advised existing borrowers to contact their loan branch to submit extension requests. The bank will negotiate the maximum possible term based on the customer's circumstances and repayment capacity, potentially reaching the 40-year cap. However, whether new loan applicants can secure 40-year terms depends on the final assessment by the lending institution, the CCB officer added. Notably, the bank's mobile app prominently displays "maximum term 40 years" in its mortgage application section. Inquiries at branches and mortgage departments of Agricultural Bank of China, Bank of China, Bank of Communications, and China Merchants Bank revealed that details of the extension policy are still being finalized, with some banks yet to receive implementation notices. Customers will be notified once specific guidelines are released.
The extended loan term directly reduces monthly payments. For a 1 million yuan loan at a 3% interest rate with equal principal and interest payments, the monthly installment drops from approximately 4,216 yuan over 30 years to about 3,580 yuan over 40 years, saving roughly 636 yuan per month or around 7,632 yuan annually. However, mortgage officers cautioned that longer terms increase total interest costs. For the same 1 million yuan loan at 3%, extending from 30 to 40 years adds more than 200,000 yuan in total interest. In response, Yan Yuejin noted that 40 years represents the maximum ceiling rather than a mandatory term. Borrowers can negotiate specific durations based on their income levels, and those with rising earnings can shorten the actual repayment period through early repayment, making total interest costs manageable. Analysts view this measure alongside the delayed disbursement policy as a coordinated approach to strengthen buyer protections and balance the rights, responsibilities, and interests between purchasers and developers.
To better align personal housing loans with development financing, the guidelines mandate that mortgage disbursements be made through entrusted payment. For completed homes, funds must be transferred to the project company's designated account at the lead bank. For pre-sale properties, payments go into the project's pre-sale fund supervision account. The introduction of a lead bank system for real estate development loans is another notable feature of the new development model. Under this arrangement, each real estate project corresponds to a single lead bank, which could be one lender or the lead arranger of a syndicated loan, ensuring closed-loop management of project funds. Dong Ximiao, chief economist at Merchants Union Consumer Finance, explained that this system curbs past practices where developers sourced financing from multiple banks and diverted funds across projects. Now, project capital is restricted to use for the specific development. Loan terms have also been extended and matched to project timelines, with pre-sale development loans capped at five years, completed property loans at seven years, and commercial real estate loans also at seven years. Crucially, the first principal repayment is scheduled after project completion filing, ensuring development funds remain in place throughout construction.
The new policy also shifts banks' lending approval focus from developer credentials to project viability. Previously, assessments emphasized corporate creditworthiness and guarantees, which streamlined approvals but risked overly broad judgments and concentrated exposure. Under the updated approach, banks must distinguish between group-level risks and project-specific risks, with approvals centered on individual projects that maintain separate accounting and independent fund operations. This closed management structure mitigates both delivery and credit risks, the banking executive noted. Dong Ximiao believes the policy package successfully balances homebuyer protection, reasonable developer financing needs, and institutional risk management. Through mechanisms such as lead bank arrangements, closed-loop fund operations, and delayed disbursement for pre-sale properties, the credit system now reinforces the defense line for project delivery, laying a stronger financial foundation for the new real estate development model and better facilitating the release of legitimate housing demand.
Additionally, the leasing market receives attention as GREENTOWN MGMT continues to expand its asset-light management services, though its direct exposure to mortgage policy changes remains limited given its focus on project management rather than property development or lending.
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