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Beijing to the rescue of its real estate sector - Immo

Beijing to the rescue of its real estate sector – Immo

China has unveiled measures to revive real estate, a crucial sector for its growth but rendered bloodless by a tightening of financing rules and by the pandemic, which has precipitated many promoters on the verge of bankruptcy.

These new measures include in particular credit support.

The Asian giant has experienced a real estate boom since the liberalization of the market in 1998, in a country where the acquisition of property is often a prerequisite for marriage and an investment. The promoters were able to develop at high speed thanks to bank loans. But their debt has swelled so much that the authorities have decided to put a stop to it from 2020.

Access to credit for developers has since shrunk considerablywhile real estate demand plummeted in China amid an economic slowdown and uncertainties related to Covid-19 restrictions.

Many real estate developers are now fighting for their survival, including the former heavyweight in the sector, Evergrande, strangled by a debt estimated last year at some 300 billion dollars.

New support measures

Real estate is in China a key sector of the economy which weighs, with that of construction, about a quarter of the GDP, and supports an army of low-skilled workers.

In this context, the authorities established on Friday 16 new support measuressupposed to offer a breath of fresh air to the sector.

They have not been published, but the main lines were unveiled on Monday by the Chinese economic press. These measures by the central bank and the banking and insurance regulator include credit support to help debt-ridden developers and to complete ongoing projects.

“A Turning Point”

Due to a lack of cash, some real estate groups have ended their work in recent months. And a growing number of furious owners have refused to honor their monthly payments, at the risk of aggravating the crisis and the defaults.

Measures unveiled by Beijing ‘guarantee’ the return of goods and order banks togrant “special loans” to achieve this end, according to a directive circulating online and cited by Chinese media.

This decision reflects a “turning point” taken by the authorities since their decision in 2020 to tighten access to credit for property developers, said economist Ting Lu of Nomura bank.

“These measures show that Beijing is ready to reconsider most of his decisions“, according to Mr. Lu.

The news caused the Hong Kong Stock Exchange to jump more than 3% on Monday at the opening, where many real estate groups are listed.

These new measures include credit support in particular. The Asian giant has experienced a boom in the real estate sector since the liberalization of the market in 1998, in a country where the acquisition of property is often a prerequisite for marriage and an investment. The promoters were able to develop at high speed thanks to bank loans. But their indebtedness has swelled so much that the authorities have decided to put a stop to it from 2020. Access to credit for developers has since shrunk considerably, while demand for real estate has taken a nose dive in China on background of economic slowdown and uncertainties linked to restrictions against Covid-19. Many real estate developers are now fighting for their survival, including the former heavyweight in the sector, Evergrande, strangled by a debt estimated last year at some 300 billion dollars. Real estate is a key sector of the economy in China which weighs, with that of construction, about a quarter of the GDP, and supports an army of low-skilled workers. In this context, the authorities established 16 new support measures on Friday, supposed to provide a breath of fresh air to the sector. They have not been published, but the main lines were unveiled on Monday by the Chinese economic press. These measures from the central bank and the banking and insurance regulator include credit support to help debt-ridden developers and to complete ongoing projects. month. And a growing number of irate homeowners have refused to meet their monthly payments, risking aggravating the crisis and the defaults. The measures unveiled by Beijing “guarantee” the return of goods and order banks to grant specials” to achieve this end, according to a directive circulating online and cited by Chinese media. This decision reflects a “turning point” taken by the authorities since their decision in 2020 to tighten access to credit for property developers, said economist Ting Lu of Nomura Bank. “These measures show that Beijing is ready to reverse the most of its decisions”, according to Mr. Lu. The news caused the Hong Kong Stock Exchange to jump by more than 3% on Monday at the opening, where many real estate groups are listed.

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