(Yicai) Sept. 29 -- Shanghai has issued detailed local implementation rules tightening requirements for commercial housing pre-sales and clarifying regulations on sales of finished houses as well as project fund management, one month after China rolled out a national policy aimed at improving the sales system of commercial housing.

Commercial housing projects whose land-use sale notices were issued on or after Aug. 28, can only apply for pre-sale approval once the main structure of each building is topped out, according to the Implementation Opinions issued yesterday by four Shanghai government agencies, including the Shanghai Municipal Commission of Housing and Urban-Rural Development.

The move comes after the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources and the National Financial Regulatory Administration issued a Notice on Improving the Sales System of Commercial Housing on Aug. 28, calling for improvements to the commercial housing pre-sale system, greater promotion of sales of completed homes and the establishment of a lead-bank system for commercial housing projects.

Presale funds will be subject to full and end-to-end supervision and will only be released from regulatory oversight after the project is registered as complete, according to the Implementation Opinions.

Developers can also opt to sell completed houses, the guidelines said. After obtaining a construction permit, they may sign home-purchase deposit contracts with buyers, with deposits generally capped at 3 percent of the total purchase price. If a developer fails to deliver the house on schedule, buyers may terminate the deposit contract in accordance with its terms. Developers must then return the deposit according to the law and assume liability for breach of contract.

The guidelines further clarify the rules and transitional arrangements applicable to property developers, helping them assess investments and plan projects, Lu Wenxi, a market analyst at Centaline Property Shanghai, told Yicai.

The requirements for pre-sales only after the main structure of each building is topped out, along with the promotion of sales of completed houses and tighter supervision of pre-sale funds will also place greater demands on developers’ cash flow management, construction schedules and product quality, Lu said.

The implementation guidelines also require developers to open project fund accounts with their lead banks and place project-related funds, including development loans, developers’ own funds and proceeds from sales of completed houses, under account management.

Shanghai will also increase its support for development loans for projects involving completed houses and quality housing initiatives. The city will help eligible real estate companies to raise project financing through bonds, stocks, asset-backed securities and real estate investment trusts.

Editor: Kim Taylor