The Beijing and Shanghai municipal governments on Thursday made major adjustments, including lowering down payments and cutting mortgage interest rates, in a bid to better support demand for first-home purchases and upgraded housing.

The moves were aimed at reducing financial burdens on homebuyers, and will help boost home sales and stabilize the real estate market, which has been facing a downturn that has dragged on overall economic development, according to industry analysts.

According to the notice released by several Beijing municipal government agencies, the lowest down payment ratio for first-time homebuyers was reduced to 30 percent from 35 percent for regular home purchases and 40 percent for commercial home purchases previously.

The required down payment ratio for second-home buyers was cut to 50 percent in urban areas and 40 percent in non-urban areas, from 60 percent for regular home purchases and 80 percent for commercial home purchases.

Also crucially, the maximum mortgage loan term was extended to 30 years from 25 years, which was imposed as part of restrictions put in place previously to tame the overheating housing market. Meanwhile, the lower limit of the interest rate for new mortgages issued by commercial banks was also lowered for both regular and commercial homes in urban and non-urban areas. After the adjustment, interest rates could go as low as 4.2 percent, according to media reports.

The capital city also increased the size threshold that divides regular homes and "luxury homes" from 140 square meters to 144 square meters, which in effect allows more home purchasers to qualify for favorable policies.

Shortly after the notice from Beijing, several Shanghai municipal government agencies also issued a notice, announcing similar policy adjustments, including increasing the threshold for regular homes to 144 square meters.

The minimum down payment ratio was also lowered to 30 percent for first-time homebuyers and 50 percent for second-home purchases or 40 percent in certain areas.

Both Beijing and Shanghai said that the moves were aimed at better supporting demand for first-time homebuyers as well as demand for upgraded housing. The moves are also in line with favorable policies taken by many cities across China to spur home sales.

Yan Yuejin, research director at the Shanghai-based E-house China R&D Institute, said that both the policy adjustments are very conducive to support homebuyers, as they help lower the costs of homes and boost the confidence of both buyers and sellers.

"[The moves] will also have a positive effect on market transactions going forward, and we believe they will further boost confidence in home buyers and sellers and in the recovery trend of the real estate market in 2024," Yan told the Global Times on Thursday.

China's housing market has been facing a downturn this year, with some real estate developers trapped in serious financial trouble, which has been hyped by foreign media outlets to smear the Chinese economy as a whole. However, both the central and local governments have been taking measures to shore up real demand of housing purchases and help meet real estate firms' reasonable financing needs.

Most recently, the just-concluded Central Economic Work Conference, which set priorities for economic policies in 2024, called for efforts to prevent and defuse risks in key areas, including in the real estate industry. The meeting noted that reasonable financing needs of real estate enterprises of different ownerships should be met equally and the building of a new development model for the real estate sector should be accelerated.

Cao Heping, an economist at Peking University, said that the policy adjustments will not only help boost activities in the real estate markets but also offer significant support for China's economic operations.

"The real estate industry accounts for a major portion of China's economic activity, so if a right path is found to spur activity in the real estate industry, overall economic activity will also be boosted, which would in turn boost expectations for economic growth," Cao told the Global Times on Thursday.