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Real Estate Buying and Leasing in China

Apr 25, 2008
If you want to be a successful real estate investor in China the most important thing you must take care of is to acquire local legal representation before even starting the search for property to match specific investment needs, and also to access the help of a licensed real estate agent.

The Chinese government has enacted seemingly conflicting laws controlling the resale of immovable property and land as well as the development of land and property and these laws and regulations are applicable to everything ranging from the possible environmental aftereffect of the sale to limiting the sale to Chinese citizens only.

Based on the particular city or area in China that an investor is looking for his property purchase there may be certain constraints attached to the amount and type of property available to be bought. The Chinese government triggered a successful and highly influential property boom when they permitted for the freehold ownership of property in China back in the 1990s and this has lead to them being pushed to strengthen all aspects of their control regarding China's property market.

They have performed this with an aim to limit furious growth and to encourage sustainability within the real estate market, but it does imply that rules keep altering and an investor should be alive to the developments in China before committing to a specific city or region incase a government's up gradation of laws could decrease or limit the possible profitability of an investment.

An example of how the government's strengthening of grip on the real estate market has already backfired on some property investors is understood when you learn that it is impossible to flip properties anymore bought off plan upon their finishing and benefit from interim price gains because of a fresh high rate capital gains tax that affects those hard who resell properties inside a couple of years of ownership.

All parties or their delegates reach the Realty Transaction Department for the completion of the transaction, final monies are handed over, taxes are due as are legal and agency fees and once the property handing over document has been signed the keys are in effect transferred to the property investor.

In Sept 2001, China enforced Foreign Invested Leasing Companies Regulations, which illustrates regulatory prerequisites for leasing companies with foreign investment. Concerning financial leasing companies, the total fortunes of the Chinese joint venture partner must not be below RMB 400 million in the year preceding the application.

The total fortunes of the foreign joint venture partner must not be below US$ 400 million in the year preceding the application. It must also possess at least five years of financial leasing experience. The official capital of a financial leasing company may not be below US$ 20 million. The capital contribution of the Chinese joint venture partner must not be below 20% of the official capital. The term of operation must not go past 30 years.

Regarding other leasing companies, the total fortunes of the Chinese joint venture partner must not be below RMB 100 million in the year preceding the application. The total fortunes of the foreign joint venture partner must not be below US$ 50 million in the year preceding the application. It must also possess at least three years of leasing experience.

The official capital must not be below US$ 5 million. The capital contribution of the Chinese joint venture partner must not be below 20% of the official capital. The term of operation must not go past 20 years. As shown earlier, the capital prerequisites are lesser for operating leasing companies compared to financial leasing companies. Always remember that if you are not thorough with the laws and regulations regarding buying and leasing you are asking for trouble.
About the Author
Gregory S. is an independent author providing assessment and comments on leading International Property Consultants in Asia and Greater China , especially CB Richard Ellis.
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