Money

Speculators are kept from cheap loans for homes

By Shen Jingting (China Daily)
Updated: 2010-07-19 07:58

Would-be home buyers in Beijing have been jumping through hoops ever since new rules came in to make it harder to use false documents and lie when applying for favorable first-home loans.

In order to define whether a loan is for a first house or a second house, banks, including local branches of foreign institutions, can no longer rely on the public credit registries system. They now need to investigate house ownership information with the help of the Beijing Municipal Commission of Housing and Urban-rural Development, according to a regulation jointly issued by the commission, the People's Bank of China and other two related authorities.

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The move was made to prevent people who already own houses but who do not have loans from applying for favorable first-house loans.

If loan applicants provide false information, they will be punished. Banks can take action such as holding back their assets and a record of the transgression may be stored on the individual's credit database at the People's Bank of China.

In Beijing, first house buyers can enjoy a preferential interest rate discounted by 20 percent, while those applying for loans for second homes must bear an interest rate 1.1 times higher than the benchmark rate and make a deposit of at least 50 percent of the total house price.

Beijing has not allowed people to get loans for third homes since May.

House agents in the capital, however, were still trying to help people apply for first-house loans.

"Though the policy has taken effect, we may have a transition period, but buyers need to be in a hurry," said Dong Liang, manager at Huixinli branch of Homelink Real Estate, a leading property agent in the capital.

According to Dong, buyers who bought their apartments previously but had not applied for a loan can still be regarded as first-home buyers at three banks - China Everbright, Bank of Communications and ICBC.

A man surnamed Wang in Chaoyang district said the latest regulation had shattered his dream of buying a larger house.

"I already own a 70-sq-m apartment but I need a larger one for my wife, my child and my parents," he said.

But the tough loan policy has hit him hard. If banks regard him as a first-home buyer, instead of a second-home buyer, he could save half a million yuan, he said.

Yang Qian, a Tsinghua University graduate who plans to buy an apartment, said the policy only hurts speculators and will not have an impact on people such as her.

"What we are going to buy is our real first home," she said.

Yang said she was happy about the new policy.

"We can see the government is closing the holes in its policy. Before this, we had no clear definition of what was 'a second house' and that gave room to buyers, agents and banks to form a secret coalition in their interest."