Chinese city of Chengdu to ensure cash-strapped developers get funding


BEIJING, Nov.24 (Reuters) – Chengdu, in southwest China, has announced plans to ensure developers receive funds from pre-sold properties and new loans, as part of the first initiative of this type of a Chinese city to alleviate a liquidity crisis that shook confidence in the sector.

Real estate companies face financial crisis due to regulatory restrictions on borrowing, with China Evergrande group (3333.HK) at the center of a crisis that has involved overseas defaults, downgrades credit and the dumping of stocks and bonds.

Problems have worsened in recent months, with new and resale home prices falling in October amid larger contractions in housing starts and developer investment, weighing on China’s economic outlook. Read more

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A notice posted on the Chengdu local housing regulator’s website Tuesday said developers can withdraw 95% of the pre-sold funds held in escrow accounts when housing projects are completed.

He said local financial institutions had been urged to increase mortgage quotas and increase mortgage disbursement, in order to protect developers and home buyers.

“It is the first city to clearly increase the mortgage quota,” said Yan Yuejin, director of the Shanghai-based Chinese E-house Research and Development Institute.

All kinds of measures should be introduced to speed up the issuance of home loans to prevent pre-sold projects from being half-completed, Yan said, adding, “The slowdown in home sales in November will ease.”

Chinese officials have yet to publicly announce they will ease property regulations, but have made financial adjustments to help homebuyers and meet reasonable demand.

Some banks have accelerated the disbursement of approved home loans in some cities and some have been urged to extend more loans to real estate companies for project development, with the aim of slightly easing liquidity pressures. Read more

In Chengdu, some key developers are allowed to defer loan repayments or reduce interest rates, the notice added.

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Reporting by Liangping Gao and Ryan Woo; Editing by Alexander Smith

Our Standards: Thomson Reuters Trust Principles.


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