By Clare Jim

HONG KONG (Reuters – China’s promise to support its struggling property sector has not helped prospects. According to developers, access to capital is difficult, and there are many restrictions on local governments.

Executives at leading developers stated that the world’s second largest economy requires more aggressive policy easing at city level in order to spur demand and prevent more property-related businesses from defaulting.

After China Evergrande Group’s bond defaults and other disruptions to global markets, Beijing repeatedly indicated more support for this sector.

China’s central banks has instructed financial institutions to continue lending real estate loans in China under prudent management, as part of its efforts to fund the sector’s “reasonable” funding demands.

Five developers were among the top 50 in China by sales and executives told Reuters that they had not been able get loans from banks.

Developers stated that they are now able to only use the cash generated from sales for new projects.

Logan Group informed investors this month that its bank credit had declined since January. There are still over 10 billion yuan (1.6 billion USD) in approved bank loans, according to a memo Reuters obtained.

The Shenzhen-based developers are currently negotiating extensions to payment with creditors. Reuters didn’t respond to a request.

A bank executive said that guidelines were being issued by headquarters to speed up the approval of mortgage loans. However, he cautioned against private property developers.

“The news of developer defaults in payment continues to alarm us… but so far, we’re careful to keep our eyes on the state-owned developers only.”

Because of the sensitive nature and importance of this matter, none of the developers or banks representatives were able to identify themselves.

‘LITTLE COHERENCE’

China’s property investments rebounded in the first 2 months of 2022. They rose 3.7% while new construction started fell 12.2%.

Overall, the demand for homes remained low with floor-area sales down 9.6% in that same period.

According to the chief financial offering of a developer struggling to repay offshore debt, there is little coordination between local and central governments regarding easing measures.

According to the eastern Chinese executive, “Every city has different policies. Different departments are trying figure out how much can they implement and it is very low effectiveness.”

Beijing has created a national policy for the pre-sale of funds that developers must keep in escrow accounts to complete their projects. This was done to rectify some of last year’s excessive tightening in fund withdrawal rules.

However, the city officials are still deciding how much money developers should keep in escrow, although many remain cautious, according to executives from property firms.

Logan claimed that the company had 18 billion Chinese yuan in its escrow account. Evergrande’s $20 billion debt offshore is considered in default and it stated in February that the accounts had 50 billion Yuan.

China has focused its stimulus efforts primarily on increasing home demand. This includes lowering mortgage rates and reducing downpayments for first-time homeowners.

As they try to determine how far they can take without going against the “houses are for speculation” central directive, some province governments have resisted implementing more definitive measures.

Zhengzhou is a city of second-tier importance, but it relaxed its purchase limits on second homes in March, making it the first such city in the country. The lead was followed by a few other cities.

Tang Xuan, a senior analyst at Beike Research Institute said that Zhengzhou could represent a turning point and predicted a recovery in sales by the middle of next year. We expect that cities with large inventories will offer more easement going forward. Beijing is expected to agree.

($1 = 6.3590 renminbi)