SHANGHAI | HONG KONG: Chinese property developer shares fell on Monday after regulatory changes aimed at restructuring the system of selling new homes before completion prompted worries about cash flow and further declines in real estate investment.
Mainland agencies issued measureson Friday to reduce developers’ reliance on funds collected from buyers before housing projects are completed, as Beijing seeks to shore up confidence in the crisis-hit sector.
The CSI300 Real Estate Index closed down 4.7%, and an index tracking Hong Kong-listed Chinese developers was off 6.2%. The Hang Seng’s Hong Kong developers index also lost 4.8%.
The collapse of the property sector, entering its sixth year, has been a drag on the world’s second-biggest economy.
State-backed developers among biggest losers
Property developers have long relied on presales – selling units before they are ready to deliver – to fund their operations.
Under new rules released by the central bank and the financial regulator, mortgages would be issued only after residential projects had been completed.
Another set of guidelines requires local governments to promote sales of completed units to prevent delivery risks.
“Developers can no longer rely on early mortgage proceeds to fund construction. Construction-phase funding must come from developers’ own funding, development loans,” Nomura said in a research report.
It added that, despite the damage to homebuyer confidence over the past few years, presales were still the dominant property business model in China, accounting for 68% of new home sales by floor space in 2025. But it expected the new regime could reduce the supply of new apartments that would push buyers towards existing housing.
State-backed developers were among the biggest losers, with Greentown China shedding 17.6%, while China Jinmao and Yuexiu Property lost 15.9% and 13.6%, respectively.
Larger state-owned players China Resources Land and China Overseas Land & Investment declined more than 9%. Private-sector rivals Longfor Group and Seazen, deemed by investors to be financially sound, fell 7.1% and 5.8%, respectively.
Years of property sector pain
Authorities have over the years aimed to stabilise the property market. However, a recovery in new-home prices in the biggest cities, like Beijing and Shanghai, has stalled, while existing home prices in smaller cities are down more than a quarter from 2020 levels.
Developers and analysts expected a drop in land purchase, property investment and new starts in the near future, as homebuilders would be left with less cash in a market where they are already struggling to sell new homes.
“Forty percent of cashflow will be unavailable for business use, which means a 40% reduction of investment capacity in the near term,” said one developer executive, who declined to be named as he is not authorised to speak to the media.
Official data shows presales and mortgages account for 40% of development capital.
China’s government land sales revenue fell 30.8% from a year earlier over the first seven months of 2026, official data showed, while nationwide property development investment dropped 19.2%.
Developers will turn to loan and bond financing to fill the presales fund gap – channels which both favour state-owned developers, who can borrow money at 2-3% interest rates, compared with 5-6% for private developers.
Measures ‘raise bar’ for developers
The new rules also seek to reduce homebuyers’ debt by extending the maximum term for personal mortgages to 40 years from 30 years, a move that would raise risk exposure of lenders.
“Banks will therefore become even more selective,” a bank source said, deepening a trend where banks issue development loans mostly to high-quality projects and top-tier developers. The source declined to be named because he was not authorized to speak to media.
State-owned developers now dominate in a market where most private property firms have defaulted, and analysts expected the consolidation would accelerate.
The new measures “have raised the bar for developers in terms of their financing ability and management skills,” Everbright Securities said in a note to clients.
The longer mortgage tenor could free up cash to boost domestic consumption in China, analysts said, but is unlikely to meaningfully lift housing demand.
“Housing demand is likely to remain constrained by employment, and therefore the income outlook, and expectations of a further decline in home prices in our view,” said Shuang Ding, Standard Chartered Bank chief economist for Greater China and North Asia.
