The Hang Seng Mainland Properties index rose as much as 16.3% in Monday’s morning session. Hong Kong-listed Country Garden, one of China’s biggest developers, gained more than 36%. The benchmark Shanghai Composite Index rose 0.8 percent, while the Hang Seng gained 3.3 percent. The measures, outlined in a policy paper by the central bank and the banking regulator, include extending a deadline to the end of the year for lenders to limit the ratio of loans to the property sector, one of Beijing’s strongest moves to ease from the pressure from the credit crisis. the industry. The People’s Bank of China’s expansion of the “collective management system for real estate loans” has the potential to affect 26 percent of China’s total bank loans, giving lenders and property developers struggling to survive a massive property downturn of the industry. According to the document signed by the PBoC and the China Banking and Insurance Regulatory Commission and seen by the Financial Times, lenders now have an indefinite period to limit the portion of their outstanding real estate loans to major banks to 40 per cent of their total loans and mortgages to 32.5%. The extension beyond December 31 is the most significant in a batch of 16 relief measures approved by central bankers and the CBIRC on November 11, according to the document. “It is vital,” said Yan Yuejin, director of research at the China E-house Research and Development Institute, adding that while pressure on over-lending remained, the measures provided relief to commercial banks and room to issue new loans. . They also come after the expansion of a key financing program that could help developers sell more bonds and ease their liquidity woes. “Together with previous support for the Rmb250bn ($35bn) bond sale programme, we believe this could be a turning point for the real estate sector as the government shifts to supporting developers in addition to supporting industry,” UBS analysts said in a note. Nomura analysts wrote: “Cash-strapped developers (especially private) construction companies, mortgage borrowers and other relevant stakeholders can now breathe a sigh of relief.” Developers’ outstanding bank loans and loans from trust funds maturing within the next six months can be extended for a year, the document showed. Regulators have urged banks to distinguish between the credit risk of individual projects and the risk of developers, and to negotiate with homebuyers to extend mortgage repayments and protect credit scores. Lenders are also encouraged to raise funds to buy unfinished projects and convert them into affordable rental homes, the document showed. These moves are designed to keep credit lines open to real estate groups and allow them to complete unfinished developments. They come against a backdrop of protests by hundreds of thousands of Chinese mortgage holders over apartments they had already paid for but were left unfinished. The package marks the latest sign that Beijing needs to roll back sweeping reforms in the real estate sector amid fears of a credit crunch and social instability. Recommended The Chinese market has been stunned by the rising number of defaults and hasty sales of assets by developers. The pace of new lending and overall social funding has fallen faster than expected amid subdued demand. Evergrande, China’s most heavily indebted developer with about $300 billion in liabilities, posted a $770 million loss last week after being forced to sell one of its most valuable assets. It also plans to put its Shenzhen headquarters up for sale with an initial auction price of $1.06 billion. Pressure on China’s property developers has increased in recent years after financial regulators introduced “three red lines”, which limit the ratio of debt to cash, equity and assets of developers, in a bid to deleverage. of the real estate sector. The severity of the property slump, however, has fueled fears of a generational slowdown in Chinese economic growth. And it has raised the risk of contagion to China’s local government financial institutions heavily exposed to real estate lending. The PBoC and CBIRC did not immediately respond to requests for comment. Additional reporting by Edward White in Seoul and Thomas Hale in Shanghai
