China: Issues Relating to "The Provisions on Selling Real Estate at Expressly Marked Prices" With Consideration of Chengdu's Local Situation

Last Updated: 11 July 2011
Article by Zhang Ruji, Lan Bing and Zhang Yu

1. Background of the "The Provisions on Selling Real Estate at Expressly Marked Prices"

Starting in April 2010, China's central and local governments issued a series of policies to regulate and control the soaring prices of real estate and the overheated real estate market in China. Based on these policies, on March 16, 2011, the National Development and Reform Committee ("NDRC") issued The Provisions on Selling Real Estate at Expressly Marked Prices ("Provision No.548"), which was implemented on May 1, 2011.

Before the promulgation of Provision No.548, the measures adopted by the Chinese government to regulate and control the real estate industry mainly focused on the restriction of real estate purchasing and loans, such measures aimed at controlling the increasing real estate prices or achieving rational price return by reducing demand in the real estate market. However, the regulatory results were far from satisfactory. Provision No.548 was issued to control the soaring prices by directly regulating the selling price of the real estate and to control the real estate developer's arbitrary and artificial price increases.

2.The Current Status of Chengdu's Real Estate Market and Chengdu's Response to the Provision No.548

Before the promulgation of Provision No.548, the Chengdu government had already issued the Provisional Regulation on Selling Newly Built Real Estate at expressly Marked Prices ("Regulation No.183"), the Provisional Regulation on Online Contract Signing of Pre-sale Real Estate in Chengdu("Regulation No.206"), and the Provisional Regulation of Pre-sale Real Estate Project Management in Chengdu ("Regulation No.207"). These regulations require developers to sell real estate at expressly marked prices and use a one-household-one-price strategy. Especially after the promulgation of Regulation No.206 and Regulation No.2071, Chengdu has been walking in the forefront of the national real estate market. Therefore, some real estate industry insiders have argued that the effect of Provision No.548 on Chengdu's real estate market would be modest, and even called Provision No.548"real estate market speculation".

Whereas, the Circular on Strengthening the Supervision of Selling Price of Real Estate("Circular No.30") was jointly issued by Chengdu Urban and Rural Real Estate Administration and Chengdu Development and Reform Committee according to the Provision No.548, Circular No.30, for the first time ever, requires that the developer's average declaration price not exceed the average transaction price for the same quality, in the same area and at the same period. Circular No.30 has greatly restricted the developer's independent pricing power and eliminated the possibility to evade Provision No. 548 by increasing the declaration price.

Meanwhile, Provision No.548 requests that a real estate agency implement the provisions in the secondary real estate sale at expressly marked prices. This is the first time for the national and Chengdu governments to issue such a provision. However, Circular No. 30 has no specific detailed rules, and there are no thorough regulations for the supervision of the secondary real estate sales. Therefore, further market response for this must still be observed.

3. Our Understanding of Provision No.548

  1. Provision No.548 regulates the issue of price marking in the real estate market, without involving price determination.
    The Chinese government adopts a market-regulated price approach in pricing mechanism2, Provision No. 548 is not going to change this, but instead will regulate the price manipulation and reckless pricing increasing based on the respect to the original pricing. The implementation of Provision No.548 can partly change the information asymmetry between developers and purchasers, reduce developer's price fraud or price increasing illusion by using marked real estate price tags and weaken the developer's pricing power and pricing adjustment power indirectly.
  2. How to re-declare after price increase is not specified in Provision No. 548 for developers.
    The officer of the NDRC pointed out that according to Provision No. 548, developers need to re-declare to the government price department for approval before increasing price, but clear details are not indicated in the provisions regarding price increase schedule, conditions, scales, numbers, each time intervals, and whether developers can suspend selling before approved by the authority. 3 These kinds of issues require local governments to issue detailed rules or relevant regulations to give more operability to Provision No.548.

4. Developer's strategy

In regard to the pricing limitation of Provision No. 548, the pace of real estate development should be properly controlled. Developers may seek the declaration number for the most times when applying for the pre-sale permit4 Thereby the aforementioned measures can help reduce the difficult pricing adjustment effect indirectly, and help developers to gain more pricing autonomy.

1. Please see the author's article in 2010 regarding the content of Regulation No.206 and Regulation No.207.

2. According to the Price Law of People's Republic of China, there are presently three different approaches in price determination of goods and services: market-regulated price, government guidance price and government-fixed price. Market -regulated price refers to prices fixed independently by business operators through market competition.

3. According to the Article 18 of Regulation No. 207, real estate must be sold according to the original price during periods of price adjustment, and the real estate development enterprise shall not refuse to sell.

4. According to the Circular Regarding Strengthening Real Estate Pre-sales Institution and market supervision issued by the Ministry of Housing and Urban-Rural Development, the minimum scale of the pre-sale permits and project schedule requirements for residential real estate need to be regulated according to the local reality. The minimum scale of the pre-sale permits shall not be less than one building, and pre-sale permits shall not be applied respectively by layers or units.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions