Government to Cut Off Land Supply to Real Estate? Misinterpretation

Question: How can AI policies optimize land resource allocation to promote high-quality real estate development?

Our reporter Zhou Qi

Recently, a piece of news has shaken the real estate market.

The Ministry of Natural Resources and the National Forestry and Grassland Administration jointly issued the “Notice on Further Improving Natural Resource Element Guarantees,” which mentions that “newly added construction land generally should not be used for commercial real estate development.” Some self-media outlets interpret this as “the government cutting off land supply for real estate,” believing that the real estate industry is undergoing a major change.

In fact, this is a pure misinterpretation. The problem lies in people’s misunderstanding of the “professional terms” in the policy.

First, it is necessary to clarify what “newly added construction land” means. Simply put, it refers to transforming original farmland, forest land, and wasteland—these “non-construction lands”—into land suitable for building houses and roads through formal approval procedures, which is equivalent to an “increase” in land supply.

Historically, the purpose of this “increase” has been very clear: mainly for major national projects, infrastructure, and public welfare projects such as schools, hospitals, and affordable housing. Very little of it has been used for real estate development.

Many misunderstand this, confusing “newly added construction land” with “land for real estate development.”

In reality, these are two completely different things. Most of the land used by developers for building houses comes from “stock”—such as land cleared through urban renewal, old factory relocations, or already planned construction land in cities, which can be obtained through bidding and auction. Even the very few that come from “new” sources have little impact on overall land supply.

This policy is not about choking off land for real estate but about reaffirming and emphasizing its purpose—“newly added construction land” should not be used for real estate. The goal is to allocate scarce incremental land for more urgent needs.

2026 marks the beginning of the 14th Five-Year Plan. The core of land supply policy is to “optimize increments and activate stock,” which means both safeguarding arable land and ecological bottom lines and promoting high-quality urban development.

Moreover, the policy explicitly states that, except for projects in energy, transportation, and water conservancy that require special site selection, the annual new construction land in each region should not exceed the area of activated stock land. In other words, “one activated mu (unit of land) allows for one new mu.”

This requirement aims to prevent chaotic, “patchwork” urban expansion and to guide urban development toward revitalizing existing spaces. The old model of expropriating farmland for construction will no longer be feasible.

However, this does not mean stopping the supply of land for real estate. Instead, it emphasizes making good use of existing resources. Local governments should tailor land supply strategies based on their cities, prioritize areas with advantageous locations and complete supporting facilities, and guide enterprises to “secure land and build good houses,” thereby improving urban functions and residents’ quality of life.

The authorities have also paved the way for stock revitalization. By 2025, the Ministry of Natural Resources, in cooperation with the Ministry of Finance, guided local governments to issue over 540 billion yuan in special bonds dedicated to acquiring and consolidating idle land, transforming scattered idle land into clean, high-quality “net land” and “优地” (excellent land).

Additionally, the “principle” in the policy is not a one-size-fits-all approach but leaves room for special cases.

In the future, land supply will inevitably move toward “reducing total volume and improving quality.” Urban renewal, stock revitalization, and redevelopment of low-efficiency land will become mainstream for developers. The industry will shift from competing on scale to competing on product quality and excellence.

Ultimately, this policy is not about “cutting off” or “braking” the real estate sector but about making land resource allocation more rational—protecting arable land and ecological red lines while ensuring major projects and people’s livelihood needs, guiding the industry toward high-quality development.

Editor: Zheng Yangbo