The China Banking and Insurance Regulatory Commission (CBIRC) confirmed on Thursday that it will provide “active credit support” to developers so they can complete delayed or stalled projects as soon as possible.
He also urged banks to issue more mortgages to qualified homebuyers to support demand and support the real estate market.
Mortgage loans rose following the People’s Bank of China cut mortgage rates
by two tenths of a percentage point in May for first home buyers. Virtually all — 90% — of mortgages were issued to first home buyers.
“The current lending pace of real estate-related loans has reached the highest pace since 2019,” Liu Zhongrui, a CBIRC spokesman, said at a press conference Thursday in Beijing.
Last month, new developer loans issued by banks also reached 52.2 billion yuan ($7.7 billion), Liu added.
The pledge is the latest in a series of moves by the Chinese authorities to appease the revolt of homebuyers across the country. A growing number of disgruntled homebuyers are refusing to pay mortgages on unfinished projects, exacerbating the country’s real estate problems and raising fears of a systemic financial crisis and social unrest.
This movement is a sign of how the liquidity crisis faced by developers is spreading to other aspects of society.
The problem began in 2020, when Beijing began cracking down on overborrowing by property developers in an attempt to curb their high debt and contain runaway housing prices. The crisis escalated last year when Evergrande – the most indebted developer in the country – struggled to raise cash to pay off debts to creditors. As the real estate sector cools down, several large companies are seeking protection from creditors. Many real estate projects across the country have been delayed or suspended due to lack of funds from developers.
Public outrage over stalled projects is growing as many homebuyers have started paying off their mortgages before they own new properties. In China, real estate firms are allowed to sell houses before completion and use the funds to finance construction. This is the most common way houses are sold in the industry.
According to analysts, the mortgage boycott could cause an increase in bad loans in banks and further dampen sentiment in the real estate sector. If sales decline further, developers could face more severe cash problems, which could lead to more debt defaults and project delays, creating a vicious cycle in the market. The real estate crisis will also put a serious strain on the economy and financial system, with real estate and related industries accounting for up to 30% of China’s GDP.
Earlier this week, China’s central city of Zhengzhou set up a developer bailout fund to deal with pending projects, one of the first steps to help local governments fight a mortgage boycott.
The fund will be jointly established by Zhengzhou-based Henan Asset Management and Zhengzhou Real Estate Group. statement
asset manager on Tuesday. Zhengzhou is the capital of the central province of Henan and is currently at the center of a nationwide mortgage boycott.
Both companies are supported by the provincial local authorities.
The fund will be used to “revive troubled real estate projects and rescue developers,” the statement said, but did not disclose how large the fund would be.