China Aims New Financing Measures For Home Projects
China aims to ramp up financing for home projects in the coming days as part of its support measures, but banks' reluctance to lend to the crisis-hit sector will remain a major obstacle for the distressed developers who need fresh funding the most. Under the "project wishlist" mechanism, governments of 35 cities across the country are gearing up to recommend to banks residential projects that need financial support. Distressed developers are hoping the new mechanism will bring succour with some of their projects getting included in the whitelist. The mechanism, which is designed to expedite issuance of project loans from banks, comes as Beijing steps up efforts to ease a liquidity squeeze in the sector and boost homebuyer confidence as new home prices in December saw steepest drop in nearly nine years. But the success of the latest financing support measure could be stymied by banks' reluctance to extend fresh credit to the struggling real estate firms due to worries about the impact on their asset quality, developers, bankers and analysts say. The liquidation of property giant China Evergrande Group ordered by a Hong Kong court this week has further clouded the outlook for property sales and added to the banks' caution. The scale of the problem is daunting: Nomura estimates there are 20 million unconstructed and delayed pre-sold homes, with a funding shortfall of 3.2 trillion yuan ($445 billion). Chinese authorities have over the past year repeatedly called for banks to extend "reasonable" lending to developers after a string of defaults. Those efforts, however, have been met with little success in diffusing the debt crisis that started in 2021. China's housing ministry, the central bank and the National Financial Regulatory Administration, the banking regulator, did not respond to Reuters request for comments. Chinese banks' aversion to extending fresh credit to the ailing property sector comes as Evergrande's liquidation highlights foreign investor despair at China's debt levels and leaves developers locked out of global borrowing markets. Real estate development loans in the world's second-largest economy grew 1.5% year-on-year to 12.88 trillion yuan ($1.8 trillion) at the end of 2023, versus 3.7% a year ago, data from the central bank showed. Besides state-owned enterprises, some of the residential projects included in whitelists made public so far are backed by privately owned developers that are deemed financially healthy. The housing authorities of the southwestern Chinese city of Chongqing said its first whitelist contains 314 projects, with a total of 83 billion yuan in financing needed and 22 financial institutions involved. These projects include those by private developers Longfor Group and Huayu Group, as well as state-backed China Vanke. The city government did not name the financial institutions involved
Tags : China Evergrande Group project wishlist Longfor Group Huayu Group financial institutions Chinese authorities