A common question we encounter from our client’s establishing factories in China is whether to lease or to purchase the land. Most of the time, a business with lease, but purchasing outright offers some benefits, if only to avoid the possibility of a problematic landlord. Business owners who are thinking of purchasing real estate in China are advised to understand the regulatory environment regarding real estate purchases in China.
There are no official limitations on the kinds of properties that foreigners are able to purchase in China. Private individual Foreigners are allowed to purchase property in China after they have worked or studied in the country for more than a year.
When purchasing an older building be aware of China’s laws and regulations regarding Eminent Domain, which is the forced sale of property to the state or to its designee. Older properties which the government believes may be made more profitable via a new development are likely candidates for an Eminent Domain forced sale. Be aware that prices offered by the government in these conditions are often below market rates, and will likely be less than what was paid to purchase the property. Newer houses and apartments are less at risk, as they are typically still seen as profitable.
Even so, keep in mind that full ownership of real estate is nearly impossible; land is generally leased from the government for a period such as seventy years or more.
When you have found a property you would like to purchase, prepare and submit an official offer letter for the purchase. The letter will set out the proposed price, the payment schedule as well as the other related conditions. If the offer is accepted, an initial deposit of one percent of the cost is typical.
If you need financial assistance, you should be able to find a bank that offers mortgage facilities for foreigners who purchase property in China.
Some properties will require approvals from the local government to complete the sale. Sometimes the Public Security Bureau is consulted.
The buyer and the seller enter into an official sales agreement. Purchasers should have their agreement notarized in accordance with Chinese standards and practices. A 30 percent down payment will typically be due at signing, thought this may be negotiated with the seller.
Be sure to register the sale with the Deed & Title Office, this is an important step as it is the registration of your property ownership rights with the government. If this is not completed, it will be exceptionally difficult at a later state to prove you are the lawful owner of the property.