China Construction Bank announced it has set up a 30 billion yuan ($4.14 billion) fund to finance rental housing amid China's efforts to develop its rental housing market, liquidize remnant assets of real estate companies and defuse financial risks in the housing sector.
So far, the fund has been mainly used to advance more than 20 projects, of which the total assets exceeded 10 billion yuan. CCB, one of China's largest State-owned commercial lenders by assets, contributed 29.99 billion yuan of the fund while a wholly-owned subsidiary of CCB Trust contributed 1 million yuan.
The bank said by setting up the fund, it will deepen the advancement of its house rental strategy, invest in remnant assets of real estate developers through market-oriented, law-based and professional operations, and strengthen coordination with all parties concerned to increase the supply of long-term and affordable rental homes under a market-based approach.
On the same day, CCB also announced the establishment of a housing leasing private fund Management Company and signed memorandums of understanding on cooperative establishment of sub-funds with market entities in a few cities, such as Beijing and Chongqing municipalities and Guangzhou, Guangdong province.
The bank will provide comprehensive services, including lending, operations management and initial public offerings of publicly offered real estate investment trusts, while local governments in these cities will give support to the sub-funds by recommending real estate projects and integrating demand for home rentals.
Tian Guoli, Chairman of CCB, said the bank will leverage more social capital to participate in real estate projects, solve the problem with the lack of adequate long-term capital investment in rental housing, help liquidize remnant assets in the housing sector to reduce inventories and lower debt-to-asset ratios, and explore a new pattern of real estate development that focuses on both home purchases and rental.
“Currently, China's real estate market is facing profound changes and major adjustments in their directions and models of development,” Tian said. “We should not only effectively mitigate risks of the housing sector but also grasp the opportunities during the period of an asset price pullback, mobilize the funds of all parties to liquidize remnants assets, and introduce a batch of cost-effective rental homes to the market to meet the housing demand for different groups of people, especially new urban residents,” he said.
The China Banking and Insurance Regulatory Commission defined new urban residents as people who live in the city permanently but have not yet obtained local hukou, an official document certifying that the holder is a legal resident of a particular area, or those who obtained a local hukou within the past three years.
There are nearly 300 million such new urban residents in China. With the acceleration of urbanization, another 100 million people from rural areas will live in the city during the 14th Five-Year Plan period (2021-25). The fund established by CCB will help increase supply of rental homes and promote gradual change in their housing consumption concept from purchasing to renting, Tian said.
