Analysis: China’s real estate finance adjustments fail to meet investor expectations

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A man walks on scaffolding at the construction site of the Beijing Xishan Palace apartment complex developed by Kaisa Group Holdings Ltd in Beijing, China on November 5, 2021. REUTERS / Thomas Peter / File Photo

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BEIJING, Nov. 11 (Reuters) – China will stand firm on policies to curb excessive borrowing by real estate developers, even as it makes financing adjustments to help homebuyers and meet “reasonable” demand against a backdrop liquidity crunch in the industry, according to bankers and analysts.

Investors are worried about a wider contagion in the real estate sector which has seen a spate of missed offshore debt payments and sales of stocks and bonds as China Evergrande Holdings (3333.HK), the biggest developer indebted to the world, repeatedly heads to the brink of default.

Shares rose on Thursday as investors snatched a hold of shabby real estate stocks, encouraged by the last-minute coupon payment from Evergrande and bet on a possible easing of financial restrictions in the sector after the data went down. showed an increase in mortgages in October.

State media also reported that developers and an industry group in the bond market discussed a possible debt issuance by developers in the interbank market, as part of what would be an easing of restrictions.

But there is little evidence that the rules to contain a build-up of debt in a sector – including related businesses – which makes up a quarter of the world’s second-largest economy, will be reduced.

“There are absolutely no fundamental changes or loosening of the ceilings on home loans,” said a banker from a state lender in Beijing who declined to be named because he is not authorized to speak to the media . “But lenders still have the flexibility to adapt to reflect the latest guidelines to ‘meet the normal financing needs’ of homebuyers and developers.”

Many developers, including Evergrande, have been desperately cash-strapped since authorities unveiled the “three red lines” last year – a key policy by President Xi Jinping that places limits on liabilities / assets, on net debt / equity and liquidity. short-term borrowing ratios.

Authorities have also imposed restrictions on mortgages to deter speculative home purchases that have driven up prices and exacerbated an affordability crisis for city dwellers struggling to access the real estate ladder.

DELETING THE BACKLOG

While some banks have ramped up the disbursement of approved home loans in some cities, no new wave of new approvals has been granted, bankers recently told Reuters. Read more

Departing from its practice of releasing mortgage data on a quarterly basis, the central bank on Wednesday released a one-line statement announcing that new mortgages jumped 40% in October from the previous month to 348 , 1 billion yuan ($ 54.5 billion). . However, the amount was only 7% higher than the monthly average for the first nine months of the year.

“We are making flexible adjustments depending on the market situation, but the general direction will not change,” said Zong Liang, chief researcher at Bank of China, one of the country’s largest public lenders.

“Our goal is very clear – we want to maintain a constant development of the real estate market, and our policy adjustments are based on the economic situation,” he told Reuters.

Some lenders had held up issuing home loans earlier in the year over fears they would be accused of fueling debt bubbles as regulators cracked down on new borrowing from developers, bankers said.

“There is no increase in (loan) quotas, but the pace of loan disbursements is accelerating,” said a banker at a state lender in Shanghai.

In early September, the Chinese banking watchdog said banks should offer financial support to homebuyers with “rigid” demand, referring to those recently married or looking for low-cost housing.

Banks should implement differentiated mortgage policies and down payment requirements, the China Banking and Insurance Regulatory Commission also said at the time, avoiding inflexible rules that penalize legitimate and non-speculative buyers.

“We hope to maintain stable and sustainable development of the real estate industry, and do not want excessive or generalized tightening to affect normal business activities and normal real estate developers,” said Wang Jun, chief economist of Zhongyuan Bank. . Reuters Thursday.

“Now we are trying to correct the over tightening. We need to ensure normal start-up and completion of projects, otherwise it could impact homebuyers and suppliers.”

($ 1 = 6.3916 yuan Chinese renminbi)

Reporting by Kevin Yao, Cheng Leng, Zhang Yan and Samuel Shen; Writing by Ryan Woo Editing by Tony Munroe and Emelia Sithole-Matarise

Our Standards: Thomson Reuters Trust Principles.

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