Home Purchase Limits Trigger Tricky Ways of Home Purchases

To an extent, limits on home purchases have calmed down the bubbling real estate market but at the same time, they have prevented many new city dwellers from buying their own home. Recently, real estate sellers have suggested home buyers adopt a seemingly attractive option to purchase a home - using the name of a registered company.

Let's take a closer look with reporter Liu Min.

So far, more than 30 cities across China have implemented 'home purchase limits' based on their own market conditions. At a new property sales reception in Shanghai, a sales representative tells the buyers that they could register a company in order to purchase a home.

"You could purchase the house in the name of a company if you are not a Shanghai local. This is currently the only way to buy an apartment for those who are restrained on home purchases especially for non-locals. The property registering bureau only needs you to provide your company's business certificate and a copy of company director's identity document."

The purchase limit in Shanghai focuses on the Shanghai locals and non-local families, but doesn't impose any limit on company property purchases. It now only takes one month to register as a company legal owner at the local Commerce and Industry Bureau, and the lowest initial capital for registration is only 20 to 30 thousand yuan. When asked whether tis phenomenon is quite common, the saleswoman admits that many people now are using this method to purchase a home.

"Many of our clients belong to the category of people who are restricted when it comes purchasing a home in Shanghai, but they have their own companies, so they usually purchase a home in the name of their companies. You don't need to present anything like your company's accounting record and you don't need to worry about the initial amount of the registration capital."

However, some market insiders remind home buyers that there are multiple traps behind this method. For example, the initial tax and fee to be paid on house purchase is similar for both individual buyers and companies, but once the ownership needs to be transferred from the company to an individual, then the tax would be enormous.

Besides paying for the Business Tax and the Property Value Added Tax, the company has to pay more Land Value-Added Tax when the property is sold. For example, take a property sold at half million more than its original price. If the property is sold from one person to another, then the individual seller only needs to turn in about 100 thousand yuan on business tax and individual income tax. However, if the house is sold from a company to an individual, then the taxes would amount to up to 240 thousand yuan, 140 thousand yuan more than sales between individuals. Besides that, an anonymous market insider says it's also very difficult to apply for a loan if you're an empty shell company.

"The banks are not stupid at all to loan you money if your company is newly established. The company has to pay for the full price first, and then apply for a mortgage loan."

Besides that, insiders also say that once the house is purchased in the name of a company, then the property needs to be listed as the company estate to be included in the annual financial report. Once the company has some financial problems, then the property may be mortgaged to fill up the capital void. If the company has multiple share holders, then such house purchase would also trigger some disputes when it comes to property ownership transfers.

For CRI, I'm Liu Min.