China's Guangdong province is considering a proposal to scrap a housing pre-sale system that's become a major avenue for developers to finance projects.
Guangdong's housing authority is soliciting developers' views on phasing out the system, which for decades has allowed home builders to receive funding upfront by selling apartments before construction has been completed, according to a document circulated to property firms and seen by Bloomberg News.
Developers have then been able to use those funds to invest in other projects elsewhere, or start new ones.
Authorities want to move away from the pre-sales system to limit risks in China's real estate market, which by some estimates accounts for as much as 20 percent of the country's gross domestic product. The current system fuels excessive property investment and has attracted incompetent players into the industry, according to the document, explaining the rationale behind the proposal.
Calls to the Guangdong housing bureau's media office went unanswered outside of office hours on Friday. The paper reported on authorities' deliberations earlier on Friday.