Inventory Clearance Accelerates: 22 Provinces Lower Commercial Property Down Payment Ratios

Source: 21st Century Business Herald Author: Zhang Min

On March 16, the Shanghai headquarters of the People’s Bank of China issued a notice stating that the minimum down payment ratio for commercial real estate (including “mixed-use commercial and residential properties”) in Shanghai has been adjusted to no less than 30%. This move aims to accelerate the destocking of commercial office real estate and further boost market activity.

On January 15 this year, Zou Lan, spokesperson and deputy governor of the People’s Bank of China, stated that, in conjunction with the China Banking and Insurance Regulatory Commission, the minimum down payment ratio for commercial real estate purchases would be lowered to 30% to support destocking in the commercial office market. Two days later, the two departments jointly issued the “Notice on Adjusting the Minimum Down Payment Ratio for Commercial Real Estate Purchases,” clarifying that the minimum down payment ratio for commercial real estate loans would be adjusted to no less than 30%.

Previously, the minimum down payment ratio for commercial real estate loans was 50%. In practice, some banks set it at 60% or higher. Therefore, this move is seen as an important signal for destocking commercial real estate.

According to incomplete statistics from 21st Century Business Herald, as of now, 22 provincial-level administrative regions have lowered the minimum down payment ratio for commercial real estate. Some provinces and cities have also introduced other measures to promote destocking of commercial properties.

Various actions indicate that the pace of destocking commercial real estate is accelerating.

Longer Clearance Cycle Than Residential

Commercial real estate generally refers to properties such as office buildings and retail shops. Unlike residential properties, commercial real estate typically has a 40- or 50-year ownership term, and its tax and fee burdens are usually higher than those of residential properties.

Due to multiple factors, China’s current commercial real estate inventory is relatively large. According to data released by the National Bureau of Statistics, as of the end of February this year, the area of unsold commercial housing nationwide was about 800 million square meters, including 190 million square meters of office buildings and commercial properties, accounting for approximately 23.9%. At the same time, about 710 million square meters of office and commercial properties are under construction.

Because of more restrictive measures compared to residential properties, the threshold for purchasing commercial real estate is relatively higher, and the clearance cycle is longer. Based on the average sales speed over the past 12 months, the current clearance cycle for office buildings (calculated based on the unsold area as of February 2023) is approximately 28 months, while for commercial properties it exceeds 30 months.

In contrast, the clearance cycle for residential properties is only about 7 months.

According to a report by CBRE, a commercial real estate service provider, the new supply of office buildings in 10 major cities nationwide is expected to reach 4.7 million square meters this year, a slight increase of 7% year-on-year. The supply is expected to gradually decline to 4.2 million and 3.5 million square meters in 2027 and 2028, respectively. For retail properties, the new supply in the next two years in eight major cities is projected to be 4.39 million and 3.56 million square meters, continuing to remain ample, with increases in supply areas in Shanghai, Guangzhou, Hangzhou, Nanjing, and Tianjin compared to previous years.

In recent years, calls for strengthened policy intervention and promotion of destocking in commercial real estate have been increasing.

During this year’s Two Sessions, Liu Yonghao, member of the National Committee of the Chinese People’s Political Consultative Conference and chairman of New Hope Group, suggested optimizing planning layouts, reducing the proportion of new commercial land, supporting the revitalization of existing commercial and office assets, optimizing “commercial-to-residential” policies, and moderately relaxing restrictions on apartments related to school enrollment and household registration.

Liu Yonghao pointed out that demographic changes and the rise of online shopping are weakening the role of offline commerce. He said that besides measures to absorb existing inventory, “new planning must consider changes in the economic landscape and make appropriate adjustments, avoiding excessive commercial planning.”

Policy Benefits Continue to Be Released

Prior to this adjustment of the minimum down payment ratio, policies aimed at destocking commercial real estate had already been introduced.

In September 2025, the General Office of the State Council issued the “Opinions on Releasing the Potential of Sports Consumption and Promoting High-Quality Development of the Sports Industry,” encouraging the lawful use of industrial factories, commercial properties, and warehousing spaces to create sports venues.

On November 28, 2025, the China Securities Regulatory Commission solicited public opinions on launching a pilot program for commercial real estate investment trusts (REITs). The core of this pilot is to open up the rights and interests financing channels for commercial real estate, providing standardized financial solutions for revitalizing existing assets.

Since the beginning of this year, positive signals have continued to emerge.

On March 5, the Ministry of Natural Resources and the National Forestry and Grassland Administration issued the “Notice on Further Ensuring the Supply of Natural Resources,” clarifying that new construction land will prioritize major projects and public welfare development, generally not used for commercial real estate development.

The “14th Five-Year Plan” released this month emphasizes promoting the classification and disposal of land that has been supplied but not developed and projects under construction, as well as revitalizing existing commodity housing and idle commercial and office properties. It also mentions that the work of renewing the use rights of industrial and commercial land will be carried out in a lawful and prudent manner.

Analysts generally believe that this not only indicates adjustments on the supply side but also that the revitalization of idle commercial properties is expected to accelerate.

At the local government level, many cities have recently introduced policies to support destocking in the commercial office market.

For example, Shanghai allows commercial buildings to be compatible with functions such as hotels, R&D and innovation, cultural and sports facilities, medical services, education and training, and rental housing (including talent apartments); Hangzhou has introduced policies related to reforming commercial and industrial land, clarifying mechanisms for efficiently revitalizing existing spaces; and temporarily changing the use of properties is permitted.

In terms of subsidies, Wuhan offers a 50% subsidy on deed tax for purchasing new commercial and office properties; Nanning provides a 10,000 yuan housing subsidy for purchases over 100 square meters of commercial and office projects.

Cifi Research Institute points out that exploring pathways to revitalize idle commercial and office properties will be a key policy focus this year, and more attempts are expected across regions.

Regarding the significant reduction in the minimum down payment ratio, the institute states that in the short term, it will help alleviate inventory pressure and improve cash flow for developers; in the medium to long term, it provides financial support for revitalizing existing assets.

However, Cifi also notes that this move does not signal a comprehensive market reversal. Compared to residential mortgages, commercial real estate loans still have significant differences in loan-to-value ratios, interest rates, and terms, and banks will carefully determine specific down payment ratios based on customer risk profiles. More importantly, the activity level of commercial real estate transactions fundamentally depends on the health of the real economy. To truly unlock “silent assets,” market confidence and the vitality of the real economy must return in tandem.