Since 2004, the PRC government has adopted various macro-control measures over the real estate market. However, these measures proved to have limited impact partly because of the lack of control over foreign investment.
Against this background, on July 24 2006, a document entitled Opinion on Standardizing the Administration of Foreign Capital Access to the Real Estate Market (FangJian  171) was issued jointly by six central government ministries. The Opinion lays down stringent regulations on, among others, the conditions for foreign investment into the domestic property sector and the acquisition of domestic properties by foreign institutions and individuals. It also adjusts the requirements for foreign investment in domestic real estate companies, transfer of projects and foreign exchange and foreign debt approvals. The main points of the Opinion are:
- Foreign institutions and individuals purchasing domestic properties for non-personal use must apply for, and set up, a foreign-invested enterprise (FIE) in China to purchase and hold properties.
- The ratio of registered capital to total investment has increased and strict conditions are imposed for obtaining foreign loans.
- Tighter controls have been imposed on approvals for the transfer of a real-estate FIE's equity and real estate projects, as well as approvals of foreign mergers with, and acquisitions of, a domestic real estate enterprise.
- Provisions in any agreement allowing a party in a real estate sino-foreign joint venture to receive a guaranteed fixed return is strictly prohibited.
However, new policies breed new opportunities, including: acquisition of property through an FIE, mergers with and acquisitions of local real estate development enterprises, fostering overseas IPO, establishing property investment companies in PRC, and investment in PRC financial institutions.
Harry Du, Fan Lin and Amy Ho
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