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'Fake divorces' in China to buy second home

Source: PTI
May 13, 2010 16:31 IST
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Forty two-year-old Li Guoliang is planning to divorce his wife, not to end an unhappy marriage, but to buy a second home as house prices in China continue to skyrocket.

Li took the decision after the Chinese government imposed restrictions on a family purchasing a second home, in a bid to curb property speculation.

But, Li and his wife will be living alone only for some time as they plan to get married again after Li buys a house. Li and his wife are among many couples planning to get a 'fake divorce' to circumvent the government's restrictions on second-home purchases, state-run China Daily reported.

A divorce could reduce the couple's down payment by $20,505 and mortgage by $14,700, said Li, who is considering buying a $4.78 lakh second home for investment in Changsha, the capital of central Hunan Province.

In mid-April, the State Council ordered banks nationwide to raise the down payment for a family to buy a second home to a minimum 50 per cent of the value from 40 percent, with a mortgage rate no less than 1.1 times the benchmark interest rate.

"After we get divorced, my wife will claim our house, so that I can apply for a mortgage as a first-home buyer since I don't have a house under my name. And we will remarry after that," Li said, adding that he got the idea from a real estate agency.

The new regulation allows first-home buyers to pay a minimum 30 percent of the property price if the apartment is 90 square metres or larger.

Chen Ping, a real estate agent in Changsha, said: "Such a 'fake' divorce may save the second-home buyer hundreds of thousands of yuan. So, why not do it?"

Chen said he had helped many couples apply for the preferential mortgage for the first-home buyer through a "fake divorce," which was "legitimate and viable, just like reasonable tax avoidance."

"In the two weeks after the new rules were introduced, I received 16 clients hoping to get a favourable loan by getting a divorce," said Li Yi, a lawyer with Tenghui Law Office in Chongqing Municipality.

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