Essentials for Buying Properties

in P R China

By

Lu Qian

Professor Emeritus, Tsinghua University

Professor, Shenzhen University

Urban Housing Reform in China since 1979

• 1979-1986 The Adoption of "Socialist Market Economy"

• 1987-1989 Emerging to Nationwide Reform Period

• 1990-1994 Housing Reform Reinforcement Period

• 1995-2000 New national Reform Period

Essential Psychological Aspects in Making Decision on Buying Houses

• Hoping to buy a house at the lowest price without properly considering its location, traffic convenience, pollution , noise etc.

• merely entrusting a well-known real estate development or housing management firm, without making careful comparison and analysis

• Hoping to complete the deal as quickly as possible without making careful analysis and comparison of several available alternatives

• Merely being attracted by the beautiful appearance and nice environment of the house without duly considering its poor functions and inadequate interior planning

Essential Psychological Aspects in Making Decision on Buying Houses

The Latest Information

• There are more than 60,000,000 m2 unsold commodity housing all over China by the end of 1998 according to the information issued by the Ministry of Construction of PRC.

• The main reasons are: The bulk of real estate development has not been reasonably controlled.

Latest Information

• Development projects exceeded the actual demand of the real estate market

• The construction of municipal and public service facilities lies far behind the tempo of housing development.

• Poor quality of completed housing projects

• Property price has been much high and cannot be lowered due to many reasons

Latest Information

• The Ministry of Finance and the National Taxation Administration recently issued a Circular , stating that upon the approval of the State Council, the business tax, real estate deeds tax, value-added tax of the real estate market has been greatly reduced since the first August 1999.

The House to be Sold shall be Legally Justified

The developer shall provide seven certificates:

1. Certificate of state land use

2. Construction planning permit of land

3. Planning permit for construction works

4. Construction permit for building project

5. Sale permit for commodity housing in construction or Sale permit for commodity housing

6. Quality guarantee of residential building

7. Instructions to residential building use

How to Avoid not Being Cheated in Signing House Purchase Contract

• Use the standard version of commodity housing sale and purchase contract recognized by the local government instead of using the contract unilaterally worked out by the developer.

• For example ,"the contract for selling commodity housing in construction to foreigners" and "Sale and purchase contract of commodity housing for foreign buyers

Main Contents of Sale and Purchase Contract of Commodity Housing

• Approval of the used land,location of the commodity housing

• time for taking over of the commodity housing

• Total contract price,ways of payment, payment time schedule

• floor area, usable area

Main Contents of Sale and Purchase Contract of Commodity Housing

• State of commodity housing: In construction or constructed

• Nature of property rights of the commodity housing, specified time of registration of property rights, responsibility of relevant parties

• Provisions concerning design variations

Main Contents of Sale and Purchase Contract of Commodity Housing

• Obligations and responsibilities of the seller concerning building decoration and finishing, standard of building facilities and quality of the building

• real estate management and post-sale service and repairs

• How to treat problems due to the difference between the floor area specified by the contract and the actual floor area

• responsibilities of breach of contract

Is it Cheaper to Buy a House by Auction Sale?

Auction sale of commodity housing gives a cheaper way to buy houses as shown by the practice in Shenzhen.

Floor area: 64.10 m2

Upset price: 148,712 yuan

Auction price: 148,712 yuan

Unit Price: 2320 yuan/m2

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