Chinese developers say funding issues and local government caution are undermining support pledges

HONG KONG, March 31 (Reuters) – China’s promises to shore up its struggling real estate industry have done little to improve the sector’s prospects, developers say, with access to finance remaining difficult and many local government authorities reluctant to relax the rules more effectively.

The world’s second-largest economy needs more decisive policy easing at the city level to stimulate demand from wary buyers and inject new credit to prevent more property-related businesses from defaulting, leaders said. main promoters.

Beijing has repeatedly signaled increased government support for the sector after bond defaults by China Evergrande Group (3333.HK) and others rattled global markets and weighed on the economy.

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As part of these efforts, China’s central bank said financial institutions should regularly issue home loans under prudent management to meet the “reasonable” funding needs of the sector.

But the executives of five developers, all among the top 50 in China by sales, told Reuters they had been unable to secure new loans from banks.

Developers said they can now only use dwindling sales money to build new projects.

Logan Group (3380.HK) told investors earlier this month that its bank credit had declined since January, with more than 10 billion yuan ($1.6 billion) in bank loans approved that did not been released yet, according to a memo seen by Reuters.

The Shenzhen-based developer, which is negotiating payment extensions with creditors, did not respond to Reuters request for comment.

A public bank executive said directives from headquarters were to speed up mortgage approvals, but to remain cautious of private property developers.

“Negative headlines of developers failing to meet their payment obligations continue to ring alarm bells…so far, we are conscious of only focusing on state-owned developers.”

All developer and bank representatives declined to be named due to the sensitivity of the issue.

‘LITTLE COHERENCE’

Property investment in China rebounded slightly in the first two months of 2022, up 3.7%, while new construction starts measured by floor area fell 12.2%.

Overall housing demand remained weak, with home sales per floor area down 9.6% over the same period.

‘Lack of consistency’ between central authorities and local governments on easing measures was also scorching hopes of a quick recovery, said chief financial bidder for a developer who has struggled to repay its offshore debt.

“Each city has different policies, different departments are trying to figure out what they can implement, and the efficiency is low,” said the executive of the east China-based company.

Beijing this year drafted a new national policy for presale funds that developers must keep in escrow accounts for project completion. The aim was to correct the excessive tightening of funds withdrawal rules by some local governments last year.

But decisions on how much developers should keep in escrow accounts are still in the hands of city officials, many of whom have remained cautious, real estate company executives said.

Logan said he had 18 billion yuan in escrow accounts. Evergrande, whose $20 billion offshore debt is considered in default, said in early February it had 50 billion yuan in its accounts.

China’s stimulus measures have mainly focused on stimulating demand for housing, including reducing down payments for first-time buyers, cutting mortgage rates and subsidies.

Some provincial governments have refrained from deploying more decisive measures as they struggle to assess how far they can go without contradicting the central directive that “houses are not for speculation,” officials said. analysts.

Zhengzhou, a major second-tier city, however eased purchase restrictions on second homes on March 1, the first city in the country to do so. A few other cities followed this example. Read more

“Zhengzhou could be a turning point,” said Tang Xuan, senior analyst at Beike Research Institute, anticipating a recovery in sales by mid-year. “We expect cities with high inventory to roll out more easing in the future, and Beijing will agree to that.”

($1 = 6.3590 Chinese yuan renminbi)

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Additional reporting by Xie Yu in Hong Kong, Zoey Zhang and Engen Tham in Shanghai; Editing by Sumeet Chatterjee and Lincoln Feast.

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