« Private loans».. Details of China's plan to end the real estate sector crisis

The Chinese authorities have taken important measures to save the real estate sector, which is facing difficulties, as regulators seek to compensate for years of severe restrictions imposed during the epidemic and the security campaign that targeted the real estate sector, factors that dealt a blow to the second largest economic power in the world.

The collapse of the real estate sector occurred after the most important shift since Beijing significantly tightened rules for financing the real estate sector and imposed widespread restrictions on lending to real estate developers in 2020, as it exacerbated the liquidity problems they suffered and led to a number of major companies defaulting on their bond payments.

The steps had wide and severe repercussions on the real estate sector, as the "Evergrand" real estate development company (the largest in China) and others failed to complete projects, which led to a boycott of mortgage payments and sparked protests among home buyers.

• Credit support for residential developers

the banking sector regulator and the central bank issued 16-item internal directives aimed at promoting the "stable and healthy development" of the sector, and these measures show Beijing's desire to undo most of the financial tightening measures it has followed.

The measures include providing credit support to debt-ridden housing developers, in addition to financial support to ensure the completion and delivery of projects, and assistance through loans with deferred payments to buyers of residential real estate.

This coincided with the issuance of 20 rules by the National Health Commission to "improve" Beijing's zero-Covid policy, as certain restrictions were eased to reduce the effects of social and economic policy.

• Private Loans

The new measures emphasize "guaranteeing the delivery of buildings" and ordering real estate development banks to provide "special loans" for this purpose.

• Cooperation with real estate companies

The document also ordered financial institutions to deal with government and private real estate companies on an equal basis and to "cooperate actively with real estate companies in crisis, in the field of risk management."

• Extension of arrangements for the transition period for real estate loans

The measures also include “extension of the transitional period arrangements for real estate loans” for developers facing difficulties and support for “high-quality real estate companies in issuing bond financing.”

But analysts warned that these changes, aimed at preventing major debt defaults, would not lead to an immediate recovery in the sector.

New home prices have been declining for more than a year while demand struggles to increase as strict anti-Covid rules have dented consumer confidence.

• Ending the real estate sector crisis

The Chinese authorities are making a great effort to end the crisis in the country's vast real estate sector, which severely affected the economy over the past year.

And after Beijing unveiled a plan to dramatically loosen lending strictures for the sector, shares of Country Garden, China's largest real estate developer, surged as much as 52% in Hong Kong.