Real estate brokers face stricter control after the Ministry of
Construction vowed to strengthen supervision of capital liquidity
in property deals to prevent brokers from embezzling customers'
down payments.
According to a regulation issued by the ministry and the central
bank this week, real estate brokers must open a bank account for
every customer to deposit the down payment. This fund belongs to
the buyer and should be supervised by a third party not involved in
the real estate business.
The fund is to be kept frozen until the deal is sealed to
prevent illegal brokers from misappropriating the money before the
customer takes ownership of the property, said Li Binren, ministry
spokesman, on Friday.
The regulation comes amid increasing reports of embezzlement and
misappropriation by real estate brokers leading to property buyers
suffering substantial losses, according to the ministry's
website.
"Misappropriation and embezzlement of down payments has been the
biggest risk for the real estate market," Li said.
Real estate brokers generally applauded the regulation, saying
it would help improve the practices of brokers in the real estate
market.
"This will make real estate deals more transparent and
regulated, helping to prevent brokers from taking advantage of
price differences and hiking up real estate prices," said a manager
with Beijing-based Lianjia Real Estate Company, who declined to be
identified.
Insiders said it was common practice in the real estate market
for brokers to make use of the down payment to buy more houses. In
doing so, they obtained more properties to sell at a higher
price.
According to Yu Bin, general manager of Shanghai-based Zhongsui
Investment Supervision Co Ltd, the new regulation compels all
companies to put their funds under supervision, whereas previously
Shanghai real estate firms were free to decide whether to have
their funds supervised or not.
(China Daily January 27, 2007)