In the midst of a continued downturn in the Chinese real estate market, authorities introduced new policies on August 28th that completely rewrote the cost model for land acquisition by real estate companies. Previously, acquiring land only required comparing the difference between land prices and housing prices. Now, it also involves considering the capital occupancy period and repayment schedule. Following the new policies, in September, the premium rate in land auctions decreased, and in October, land supply in first-tier cities cooled off.
According to a report by “China First Financial” on October 13th, as October approached, land supply in first-tier cities noticeably slowed down. By now, fewer land plots have been announced for auction in October in first-tier cities, with only 5 plots waiting to be auctioned in Guangzhou starting at 1.72 billion yuan, while Beijing, Shanghai, and Shenzhen have no plots waiting to be auctioned.
The report indicated that after the introduction of the new policies on real estate sales on August 28th, both local governments and real estate companies are adjusting the pace of land auctions. On the supply side, local governments have started optimizing land parcel arrangements to assist real estate companies in balancing cash flow pressures. Real estate developers can no longer simply calculate the difference between the “flour” (land) and the “bread” (housing) when acquiring land, but they also need to reassess the capital occupancy period and repayment schedule.
On August 28th, the Ministry of Housing and Urban-Rural Development, Ministry of Natural Resources, and the China Banking and Insurance Regulatory Commission jointly issued a “Notice on Improving the Sale System of Commercial Housing,” proposing the implementation of on-site sales of commercial housing. For newly auctioned land for commercial housing projects and those already auctioned but pending construction project planning permits, on-site sales are given priority. Projects sold through pre-sales must meet higher pre-sale requirements, with the main structures of the buildings having to be completed and stricter regulations on pre-sale funds.
A report by “Securities Times” mentioned that the more fundamental change lies in the financing function. Experts pointed out that the new policies have stripped the financing function from the pre-sale system; all house purchase funds must enter a regulated account, and can only be used after completion and registration, preventing real estate developers from using sales receipts for land acquisition as before.
On October 13th, the China Index Research Institute analyzed that this policy change has altered the timeline for real estate developers in terms of development and repayment. Previously, developers could recycle some funds through pre-sales after reaching a certain stage of construction, using them for subsequent construction or other projects. Under the new policies favoring on-site sales, developers typically need to invest more capital and wait for project completion before selling the houses and recovering sales proceeds.
On-site sales have extended the repayment period by
1 to 2 years, with the peak capital occupancy about 2 to 3 times that of pre-sale models. Industry insiders describe that the development process has shifted from “land acquisition, construction, pre-sale” to “land acquisition, construction, building topping-out, pre-sale, completion, repayment,” adding two more stages that each require specific operational criteria.
The changes in financial pressure have been reflected in some cities’ land auction markets. The new policies have prompted real estate companies to form alliances to acquire land. In the Hangzhou downtown area, the first two residential land plots auctioned were both won by consortiums. The Gimpo Shiqiao plot only had 2 real estate companies participating, with a premium rate of 6.22%, while a plot on the same block auctioned in July 2025 saw 9 companies competing with a premium rate of 28.1%.
The difference in the number of participating companies and premium rates reflects a more cautious bidding attitude among real estate companies.
Financial media outlet “Hua Duo Finance” believes that with the reduction in pre-sales proceeds, real estate companies must rely on their own funds and development loans, with the first repayment of development loans postponed until after project completion. Also, with strict bank regulations and closed fund management, credit approvals now focus more on specific projects rather than the overall enterprise. In this scenario, a longer repayment period and higher funding costs will likely squeeze out small and medium-sized developers, benefiting state-owned enterprises while pressuring highly leveraged firms.
Some market phenomena align with this trend. “Every Economic Real Estate” reported that in the first residential land auction in Xiamen after the new policies, a state-owned enterprise won the mandatory on-site sales land plot at the base price, indicating that state-owned enterprises are becoming the main force in land acquisition due to financial pressures. According to data from the China Index Research Institute, in the first half of 2026, only three “hundred billion” real estate companies remain, namely Poly, China Overseas Land & Investment Ltd., and China Resources Land, all of which are state-owned enterprises.
Furthermore, data from the China Index Research Institute shows that from January to September 2026, the total land acquisition amount for a hundred real estate companies was 578.5 billion yuan, a 20.5% decrease year-on-year, expanding by 2.7 percentage points compared to January to August. In September, the average premium rate for residential land in 300 cities nationwide was reduced to 6.9%, indicating an overall cautious approach in land auctions.