The ministry of housing and urban-rural development, the ministry of finance and the central bank will support developers through special loans from policy banks, state broadcaster China Central Television reported.
Caixin confirmed from several independent sources that the loans will be initially provided by China Development Bank and Agricultural Development Bank of China, and the Export-Import Bank of China may join the effort later.
A liquidity crisis among China’s property developers has led to a plunge in new projects and put about 5% of existing apartment construction on hold, sparking mortgage payment boycotts by angry homebuyers.
The spreading mortgage strike has sparked fears that the crisis will further squeeze Chinese banks, which are already grappling with liquidity stress among developers.
The strike also poses a risk to the broader housing market by keeping homebuyers on the sidelines.
The central government will provide interest subsidies of 1% on loans to the policy banks for no longer than two years, according to the sources. Borrowers will be municipal governments, and the special loans will be recorded as local government debt.
In principle, local government loans are taken out for no more than three years. In the first two years, the interest rate will be 2.8% after the subsidies and in the third year will rise to 3.2%. If the loans are not repaid after three years, the rate will double from the third-year level.
The regulators made clear that the 200 billion yuan national rescue fund doesn’t aim to stimulate the real estate market or rescue developers. The funds will be strictly limited to the construction and delivery of residential projects that have been sold or suspended due to developers’ liquidity difficulties, the regulators said.
Local governments will comb through local housing projects and review developers’ assets and liabilities before lending the funds, Caixin learned.
Applications for the loans will be due at the end of March 2023, according to a person close to the matter. An executive at a real estate company said a local working group was notified orally of the application rules.
Homebuyers stopped making payments on more than 100 presold projects in more than 50 cities as of July in protests over delayed delivery of housing units by cash-strapped developers, according to China Real Estate Information Corp (CRIC). Some homebuyers accused of developers of misusing sales proceeds while dragging out construction.
China’s top banking industry regulator last month pledged to strengthen coordination with housing authorities and the central bank and to support local governments in pushing forward housing project delivery and safeguarding people’s livelihoods.
A July 28 meeting of the Politburo, the country’s highest policymaking body, called for action to “stabilise the real estate market” and the use of “city-specific policies.” It also told local governments they would be responsible for ensuring the “timely delivery” of homes under construction that have already been paid for.
Since July, more than 10 cities or counties introduced various measures to ensure the delivery of housing projects. Many local governments planned to set up rescue funds and introduce government-backed companies to participate in stalled projects.
Zhengzhou, the capital of central China’s Henan province, where many of the boycotts are occurring, put in place a 10 billion yuan bailout fund to leverage contributions from state-owned enterprises and banks to complete construction of unfinished projects.