Chinese Real Property Transactions

Real Property Registration System

Real property transactions in China are governed by the Real Property Registration System (Budongchan Dengji Zhidu, 不动产登记制度), established by the Interim Regulations on Real Property Registration (2014, effective 2015) and codified in the Real Property Registration Law (effective 1 January 2021, incorporated into Book II of the Civil Code). The registration system covers land, buildings, forests, grasslands, and other immovable property.

The 2015 reform was a fundamental restructuring of Chinese property registration. Previously, registration was administered by multiple agencies — land registration by the Ministry of Land and Resources; building registration by the Ministry of Housing and Urban-Rural Development; forest registration by the State Forestry Administration — creating duplication, inconsistency, and corruption. The 2015 reform unified registration under the Ministry of Natural Resources, establishing a single, nationwide Real Property Registration Platform that records all registered interests in real property.

Registration is compulsory for the creation, transfer, and encumbrance of real property rights (Civil Code Article 209). The registration is constitutive — the right is created or transferred only upon registration — rather than merely declaratory. The national platform enables real-time verification of property rights and encumbrances.

Title Transfer

Title transfer (suoyouquan zhuanyi) in real property requires: (1) a valid contract for sale or other transfer; (2) payment of the agreed price (or provision in the contract for deferred payment); (3) payment of applicable taxes (deed tax, value-added tax, and urban maintenance and construction tax); and (4) registration of the transfer with the local real property registration office.

The transfer procedure involves: the parties executing a sale contract at the local real property registration office; the purchaser paying the deed tax (typically 1-3% of the purchase price, depending on the property type and the purchaser’s status); the parties submitting the application for transfer registration with supporting documentation (including identity documents, the sale contract, tax payment receipts, and the original title certificate); and the registration office completing the transfer in the platform and issuing a new Real Property Title Certificate (Budongchan Quanshu Zhengshu).

The 70-year land use right (tudi shiyong quan) is the most distinctive feature of Chinese real property. Urban land is owned by the state; private ownership of land is not permitted. The purchaser of a building acquires ownership of the building but only a leasehold interest in the underlying land — a granted land use right (huabo tudi shiyong quan) for a fixed term (70 years for residential use, 50 years for mixed-use, 40 years for commercial use). The Civil Code (Article 359) provides that the land use right for residential purposes is automatically renewed upon expiry.

Pre-Sale (Yushou)

Pre-sale (yushou, 预售) is the dominant method of residential property sale in China, accounting for over 80% of new home sales. Under the pre-sale system, developers sell apartments before construction is completed. The purchaser pays the purchase price (or a deposit) before the property is built, and the developer is obligated to complete construction and to deliver the property.

The pre-sale system is regulated by the Regulations on the Administration of the Pre-sale of Commercial Housing (1994, revised 2004). A developer must satisfy conditions before offering pre-sales: (1) the land use right has been granted; (2) the developer holds a construction permit; (3) the investment in construction has reached 25% of the total investment; (4) the developer has determined the construction schedule and completion date; and (5) the developer has registered the pre-sale contract with the local housing authority.

The pre-sale contract must specify: the property’s location, area, and price; the completion date; the delivery date; the quality standards; the developer’s warranty obligations; and the parties’ rights in the event of delay. The purchaser’s deposit must be deposited in a pre-sale fund supervision account (yushou zijin jiandu zhanghu) to ensure that the funds are used for construction.

The pre-sale system has been controversial. The 2022-2023 real estate crisis — in which multiple major developers defaulted on construction obligations, leaving hundreds of thousands of pre-sale purchasers without completed apartments — exposed the system’s weaknesses. The government response has included requiring developers to segregate pre-sale funds, strengthening supervision accounts, and introducing measures to facilitate the delivery of stalled projects.

Mortgage Registration

Mortgage registration (diya dengji) is the mechanism for securing loans with real property. The mortgage must be registered with the local real property registration office to be enforceable against third parties. The registration records the mortgagee’s name, the property description, the amount secured, and the term of the mortgage.

The mortgage registration procedure requires: the mortgage contract (specifying the loan amount, interest rate, repayment schedule, and property description); the mortgagor’s title certificate and identity documents; the mortgagee’s identity documents; and the application for registration. The registration office issues a Mortgage Registration Certificate (Diya Dengji Zhengshu).

The mortgage priority order (diya shunxie) is determined by the date of registration. A first mortgage has priority over a second mortgage, regardless of the order in which the loans were made. The Civil Code (Article 414) provides that the priority of competing mortgages is determined by the order of registration.

The enforcement of a mortgage requires the mortgagee to apply to the court for an enforcement order. The court may order the sale of the property by auction, pay the enforcement costs and the priority claims, and distribute the proceeds to the mortgagee.

Property Tax Pilot

China does not have a national property tax on residential property. The property tax pilot (fangdichan shui shidian) was launched in Shanghai and Chongqing in 2011, applying to a limited category of residential properties.

The Shanghai pilot applies a tax to: newly purchased second homes (at a rate of 0.4-0.6% of the purchase price); luxury homes purchased by non-local residents; and homes purchased by locally registered families exceeding a per-capita exemption area of 60 square metres. The Chongqing pilot applies a tax to: luxury homes (defined as homes with a price exceeding three times the average market price, taxed at 0.5-1.2%); and vacation homes owned by non-local residents.

The pilot programmes have had limited fiscal impact, generating approximately RMB 2 billion annually in total revenue. The National People’s Congress has discussed the introduction of a national property tax, and a draft legislative plan was prepared in 2021, but the deteriorating real estate market has delayed the legislative timetable.

Beijing Housing Reform

The Beijing housing reform of 1998-2000 abolished the welfare housing allocation system (fuli fang), under which employers allocated housing to employees at nominal rents, and replaced it with a housing monetisation system (zhufang huobi hua), under which employees receive housing subsidies and purchase housing on the market.

The reform converted existing public housing (gongfang) to: reform housing (fanggai fang) — existing public housing sold to sitting tenants at below-market prices, with restrictions on resale; affordable housing (jingji shiyong fang) — newly built housing sold at controlled prices to eligible low- and middle-income families; and price-capped housing (xianjia fang) — commercial housing sold at government-capped prices.

The reform created the modern Chinese real estate market. The commercial housing market grew from near-zero in 1998 to over RMB 10 trillion in annual sales by 2020. The reform also created the distinction between the commercial market and the social housing system, which includes public rental housing, affordable housing, and price-capped housing for lower-income groups.

Conclusion

Chinese real property transactions are governed by a registration-based system that provides clarity of title and security of transactions. The pre-sale system dominates new home sales but creates risks for purchasers. The 70-year land use right is the foundational institution of Chinese real property, and the automatic renewal of residential land use rights under the Civil Code has resolved a long-standing source of uncertainty. The property tax pilot in Shanghai and Chongqing remains limited in scope, and national property tax legislation has been deferred.