How To Purchase Property In Shanghai For Foreigners Under New Policy? 

Author: Lawyer Jia Mingjun  Director of Shanghai Whole-Guard Law Firm

On 11 July 2006, the Opinions Concerning Regulating the Administration and Entry of Roreign Investment to the Real-Estate Market (Jian Zhu Fang [2006] No.171) was jointly issued by the Ministry of Construction, Ministry of Commerce, National Development and Reform Commission, People’s Bank of China, State Administration for Industry and Commerce, and State Administration of Foreign Exchange (SAFE).

The notice provides for new restrictions on entry into, and operating in, the People’s Republic of China real estate market, including prohibitions on certain foreign individuals purchasing property, and requirements for foreign companies to establish a commercial presence in the PRC for such purposes.


So, what is the actual fact? How to understand this new policy for foreigners (including Hong Kong, Macau, and Tai Wan, the followings are the same)? How to purchase the real estate in Shanghai then? Because of the complicated and more complex of the house purchase for foreign investment institutions and companies, I will state that situation in other articles. And today, let’s talk about the situation that a foreign individual to buy a real estate in Shanghai. Here, you should clear up one word ‘the foreigner’ in the sentence of when the foreigner signs the contract of selling commodity houses . It means:


1. foreign individuals
2. overseas Chinese, including those who held the Chinese passport and no I.D. card, but they live in abroad
3. the residents from Hong Kong, Macau, Tai Wan
4. the foreign institutions or companies registered in abroad, including Hong Kong, Macau, and Tai Wan

First of all, can I buy the commodity houses in China?

1. According to the new policy, foreign individuals who live in abroad are prohibited to purchase the commodity houses in china. Anyway, through the rightful run of us, you could achieve your goal indirectly. And, I will state this point in other articles.


2. If you have worked or studies in china over one year, you are allowed to buy a commodity house tailored to your needs for own use. But, under the Chinese policy, only one house for own use in your name are restricted to be bought. In the most districts of Shanghai, the administration bureaus have stopped to do the transfer of property right of the second house transaction for foreigners. For example, Pu Dong stopped it in 13th Oct. 2006, Jing’an and Bao Shan stopped it at 21st Oct. 2006.


3. You are prohibited to buy the commodity house that not used for own use whenever you have lived in Shanghai for over one year, if you are foreigners (an exception to the residents from Hong Kong, Macau, and Tai Wai). There are no regulations to give the definition of ‘not used for own use’ in China. But, we are sure that the administration bureau will not assist to do the transfer of property right for you, if you buy the commodity house that are not in accordance with the provision.


4. According to the Chinese realty policy, you are allowed to purchase a commodity house tailored to the needs for life but restricted to a certain area, if you are overseas Chinese or the residents from Hong Kong, Macau, and Taiwan. In practice, only one house is restricted to buy. Actually, it is not very clear what s the needs for life mean, and no provisions as well.

In summary, lots of our foreign friends think that they can’t purchase the commodity house in china. I will tell you that it is a wrong and misunderstand opinion. Though, there are still some restrictions from Chinese government, it is feasible to purchase by a proper operation.

Second, how to operate the procedure of house purchase if you can’t meet the requirements?

It is difficult to operate the procedure of house purchase directly if you’ve lived in china less than one year. Till now, there are no provisions to prohibit buying second-hand house, so I suggest buying the second-hand house. Maybe, you are puzzled with the commodity house and the second-hand house , and here, I will explain them for you.
The commodity house is the new built house that are developed by the real estate company, and sold in the market after gain the selling license. Simply speaking, the commodity house can be understood by the house bought from the real estate company.


Relatively speaking, the second-hand house is the house selling in the second-class market. All the houses that resold in the market are called the second-hand house. If you buy the house from individuals, then that house is the second-hand house.


Due to the speculative behavior and business investment before in shanghai real estate market, the second-hand market of high-level and middle-level house is very hot. Any way, you could turn to our law firm or agency to purchase the house you like.


In totally, the new policy is the restriction to the commodity house, and not the second-hand house. In the practice, you are allowed to buy one house only as well.

Thirdly, is it feasible to purchase more than one house?

Normally, it is impossible to buy the second house directly, due to the Chinese policy. But it does not show that there’s no way to buy more than one house, you could handle it through the ways indirectly and flexibly. It is popular with the foreign investment company to purchase from various places through the agencies, and even more, some foreign investment companies issue the shares through the native agencies. Although, those two ways are normally used by the big financial group, as the nature persons, foreign individuals can use them as sources of reference. You could achieve your goals to control and own the real estate in China, for example, some foreigners tend to entrust a nature people who has the right to buy through signing the agreement, and then manage the fund through mortgage, guarantee, or entrust the third party (a law firm, etc.). Few are worried about that the improper treatment of the real estate by the nature person who is entrusted will lead to the serious result, and making them can’t get the real right, only get the proper claim. Related to those worries, Whole Guard Law Firm will try to help you to avoid the damages to the max through some remedies and safeguard mechanisms. Anyway, it is better to protect the real right of foreigners directly, so usually, realty lawyers of Whole Guard Law Firm will provide different legal proposals tailored to the needs of foreigners. If you need further consultant, please don’t hesitate to contact us at: 021-5877 5152 / 021-5877 5153.