Following the well know opinion No. 171 (July 2006) which set out far-reaching new polices governing foreign investment in China Real Estate, various Beijing government authorities have issued a Notice on the detailed rules for the implementation of the Opinion in Beijing.
Introduction
On 29 January 2007, the Beijing Construction Committee, Foreign Affairs Office of the Beijing Municipal Government, Beijing Public Security Bureau, Beijing Administration of Industry and Beijing Bureau of Commerce issued a joint Notice on Administration of the Purchase of Real Property by foreign institutions and individuals (the Notice).
The Notice contains detailed rules on the implementation in Beijing of the well-known Opinions on Regulating Market Access and Administration of Foreign Investment in the Real Estate Market (Opinion 171).
Key Features of the Notice
1. Purchase for Self Use
Opinion 171 imposed a self use requirement on foreign entities and individuals, no longer permitting them to purchase property in China for non-self use / investment purposes. However, Opinion 171 did not specify what kind of documents would be required for a self use purchase. The Notice now fills the relevant details as regards self-use pre-sales and title transfer registrations of real property in Beijing. For example, if a foreign entity intends to purchase real property for its branch or representative office in Beijing, it must submit the business license or registration certificate of such branch or representative office. Foreign individuals (including Hong Kong, Taiwan or Macau residents) must provide, among other things, valid travel documents and the certification on residency status of overseas individuals issued by the Foreigners Entry and Exist Division of Beijing Public Security Bureau. In addition, the purchaser must provide a written undertaking that the property is indeed for self use purposes.
2. Purchase for Investment
Another interesting feature of the Notice is that it expressly acknowledges that foreign entities and individuals may purchase properties in Beijing for non-self use / investment purposes by setting up a business presence. In that case the regulations on foreign investment enterprises (FIEs) in the real estate sector will apply. Since the issuance of Opinion 171, there have been few instances of recognition by government authorities that foreign investors may invest in real estate sector not only as developers, but also for leasing purposes or onward sales. Any foreign entity or individual wishing to buy property in Beijing for these purposes now must establish a business presence in the form of an appropriate FIE and provide the FIE's foreign investment approval certificate and business license as part of the application for the property pre-sales or ownership registrations.
Like Opinion 171, the Notice does not expressly address the question of whether foreign entities and individuals who directly purchased properties prior to Opinion 171 will continue to be allowed to lease out or transfer their properties. However, the Xinhua News Agency quoted an official of the Beijing Construction Committee after the issuance of the Notice, indicating that foreign owned property that predates Opinion 171 would be "grandfathered".
