China’s 16-point plan to rescue its ailing property sector

CHINA’S sweeping rescue package to salvage its real estate market is detailed in a 16-point playbook for finance officials across the country.

The initiatives range from addressing the liquidity crisis faced by developers and a “temporary” easing of a signature restriction on bank lending. It marks all-round efforts to bail out the real estate market, which central bank governor Yi Gang said he hope would have a “soft landing” after recent data showed improvement.

Here are the main points of the policy package:

1. Property development loans for developers

  • Financial institutions should treat property developers under state or private ownership equally.
  • Lenders should specifically support developers that have focused on real estate businesses and have sound corporate governance.

2. Home-buying requirements for individuals

  • Support local governments to “reasonably” set down-payment thresholds and mortgage rate floors in a city-specific approach to accommodate basic and improving housing demand.
  • Optimise purchasing rules on first homes by new city dwellers.

3. Construction companies

  • Ensure “continuous and stable” fundraising by construction companies.

4. Extension on developer borrowings

  • Developers’ outstanding bank loans and trust borrowings due within the next six months can be extended for a year.

5. Bonds

  • Bond issuance by quality developers will be supported.
  • Repayment on developers’ bonds can also be extended or swapped through negotiations.

6. Trust financing

  • Trust companies are encouraged to provide developers funding support over mergers and acquisitions, rental properties and retirement homes.

7. Special loans for project completion

  • Policy banks China Development Bank and National Bank for Agriculture and Rural Development should offer special loans “in an efficient and orderly manner” to ensure property projects are delivered.

8. Additional support to ensure residential project completion

  • Major lenders of residential projects that are facing construction delays should offer additional financial support.

9. Property project acquisition

  • Banks and asset management companies are encouraged to support acquisitions of property projects by stronger developers from weaker rivals.
  • Banks and asset management companies can issue bonds dedicated to real estate project acquisitions.

10. Market-based approaches including bankruptcy and restructuring

  • Asset management companies are encouraged to deal with residential projects as bankruptcy administrators and investors in restructuring.

11. Homebuyers’ mortgages

  • Encourage banks to negotiate with homebuyers on extending mortgage repayments if their property purchasing contracts have been changed or cancelled, or if they are under Covid-induced unemployment.

12. Mortgage repayment

  • Buyers’ credit scores will be protected. Credit scores have been the centre issue of a widespread mortgage boycott since July, as impaired creditworthiness would make it harder for people to buy real estate in the future.

13. Easing a major restriction on banks’ property lending

  • A restriction on bank lending to developers can be “temporarily” eased. China began imposing caps on bank’s property lending in 2021, capping loans to developers and mortgage lending.
  • Banks which have breached the cap will be given extra time to meet the requirement.

14. Fundraising for acquisitions

  • Financing rules related to property project acquisitions will be temporarily optimized, and banks and national asset management companies should utilize the new beneficial policies on real estate financing.

15. Lending on rental properties

  • Financial institutions should ramp up support for companies that own rental property business, and actively accommodate their long-term funding.

16. Diversify fundraising for rental properties

  • Banks can issue bonds dedicated to building rental properties.
  • A trial on real estate investment trusts, or REIT, should be pushed forward. – BLOOMBERG