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Chinese city of Chengdu to ensure cash-strapped developers get funds -Breaking

by Mike Robinson

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© Reuters. FILE PHOTO – People in face masks stroll through a mall after the outbreak of coronavirus disease, COVID-19, occurred in Chengdu (Sichuan Province, China), September 8, 2020. REUTERS/Tingshu Wang/File Photo

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By Liangping Gao

BEIJING, (Reuters) – Chengdu in China’s south west said that it would take steps to make sure developers get funds from the sale of properties. This is the first Chinese city to act to alleviate a liquidity crisis which has shaken faith in the sector.

Financial pressures for real estate firms are due to regulations restricting borrowing. China Evergrande Group has been at the heart of the crisis that saw offshore debt defaults, downgraded credit ratings, and the dumping shares and bonds.

China’s economic prospects are being impacted by the worsening of these problems. In October, prices fell for both new and used homes due to deeper contractions in investment and construction starts.

Chengdu’s local housing regulator published a notice online Tuesday stating that developers may withdraw 95% from presold funds in escrow accounts after housing projects are complete.

The report stated that local financial institutions were told to increase their property credit quotas, and to ramp up disbursement property loans to help protect developers and homeowners.

Yan Yuejin (director of E-house China Research and Development Institution in Shanghai) stated that “that is the first city to clearly increase the quota for property loans.”

Yan stated that all kinds of measures will be taken to speed up the issuance of loans for property to stop pre-sold projects being incomplete. Yan also said: “The November slowdown in home sales will improve.”

Although the Chinese government has yet to make public statements about easing property laws, they have implemented financial adjustments to assist homebuyers and satisfy reasonable demand.

In an effort to reduce liquidity pressures, some banks have expedited the disbursement in certain cities of home loans approved. Others have been instructed to extend more loans to property companies for development projects in order to slightly ease liquidity.

Some key developers in Chengdu are permitted to delay loan repayments, or have lower interest rates, according to the notice.

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