BEIJING (Reuters). China’s policies against excessive lending by property developers will not be changed, even though it offers financing modifications to home buyers to meet reasonable demand in an industry liquidity crisis. Analysts and bankers say that China will continue to stand firm.

The property sector has been plagued by a series of late offshore debt payments, sell-offs of shares and bonds, and China Evergrande Holdings (the world’s largest developer) is constantly on the verge of default. Investors are concerned about the potential spread of contagion.

Stocks rose Thursday after investors purchased battered shares of property. Evergrande’s last-minute coupon and hopes for a relaxation of restrictions on finance in the sector following a rise in October mortgages led to investors snapping up these shares.

The state media reported also that developers met with a group representing the bond market to discuss potential debt issuance in interbank markets by developers. This would result in an easement of restrictions.

However, there are no signs that the rules that were established to limit debt growth in one sector (including related businesses) that is responsible for quarter of the global second largest economy will be relaxed.

According to a Beijing state banker, there have been no significant changes in the cap on property loans. They declined to name their client as they aren’t authorized to discuss media. Lenders have the flexibility to adapt to the new guidance to’meet the normal financing requirements’ for both developers and home buyers.

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

To discourage speculative buying, authorities have also placed lending restrictions on mortgages. This has led to an increase in prices and worsened the affordability crisis facing city dwellers trying to climb up the property ladder.

CLEARING BACKLOG

Reuters has learned that although some banks have accelerated approvals for home loans in some areas, they are not granting any new approvals.

The central bank released a single-line statement Wednesday to inform that mortgage loan applications rose 40% to 348.1 billion Yuan ($54.5 million) in October, a break from its usual practice of publishing data quarterly. The amount, however, was only 7% more than that of the previous nine months.

Zong Liang (chief researcher, Bank of China), one of China’s largest state lenders, stated that while we are making adjustments to the market, the overall direction of our research will remain the same.

He stated that “our goal is very clear – we want steady development of property markets, and our policy adjustments rely on economic conditions.”

The bankers stated that some lenders held off on issuing home loans in early 2012, fearing being charged with fuelling the debt bubbles, as regulators tightened their gripes about new lending by developers.

A Shanghai banker said that although there has not been an increase in loan quotas, the rate of loan disbursement is increasing.

China’s bank watchdog stated in September that banks must offer financial assistance to homebuyers with “rigid demand”, which refers to people who are newly married and/or seeking affordable housing.

The China Banking and Insurance Regulatory Commission stated that banks should have differentiated mortgage policies and down payment requirements. This is to avoid inflexible regulations that penalize legitimate, non-speculative homebuyers.

Wang Jun, Zhongyuan Bank’s chief economist, stated to Reuters that they hope for steady, sustainable growth of the real estate sector and don’t want any tightening.

We are now trying to rectify over-tightening. It is essential that projects start and are completed as usual, or there may be an impact on suppliers and homebuyers.

($1 = 6.3916 renminbi)