Experts: Extension of loan repayments to bolster developers, boost confidence

This week's extension of policies supporting China's real estate sector should help allay any potential worries of financial institutions about developers' ability to repay loans amid a tardy recovery of the industry, and boost market confidence, experts said on Tuesday.

Their comments emerged after the People's Bank of China, the country's central bank, and the National Administration of Financial Regulation, issued a joint notice late on Monday extending a basket of financial policies in support of the housing market.

Part of the 16-step guideline, rolled out in November by financial authorities to beef up policy support for the housing sector, will now extend till Dec 31, 2024, the statement on Monday confirmed.

Financial institutions are encouraged to negotiate with real estate enterprises regarding their outstanding loans, such as housing development loans, in a market-oriented manner, under the condition of ensuring creditors' rights.

Financial institutions are incentivized to help developers ensure timely delivery of housing projects by extending or adjusting loan repayments. Developers' loans maturing before Dec 31, 2024 will be extended for another year.

In addition, commercial banks are required to provide accompanying financing to projects supported by special loans, with the loan's risk classification unchanged. For any non-performing loans arising from the newly issued packaged loans, relevant institutions and personnel are exempted from liability under the condition of due diligence.

Experts said they believe such a move will bring relief to both the housing market and the financial institutions concerned, as it reassures that policy efforts to support the housing market are stable and won't cease soon.

Tian Lihui, director of the Institute of Finance and Development at Nankai University, said he believes the policy extension will help stabilize the real estate market in the latter half, as it encourages financial institutions to issue real estate loans.

"Given the weak recovery in the housing market, financial institutions appear to have concerns over developers' ability to repay loans, while some loans are even withdrawn," Tian said.

"The new notice further facilitates financing for developers by ensuring further support, and mitigates worries of financial institutions. This will help create a financing climate conducive to developers."

He said such policies can also support reasonable demand for various types of housing loans via differentiated credit and promote the growth of rental housing.

Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co, said that going forward, optimization of various policies and loan products is needed to improve real estate financing. More support is also needed to safeguard high-quality real estate companies' liquidity conditions and secure timely delivery of housing projects.

Wang Qing, chief macro analyst at Golden Credit Rating, said he expects more moves to help the sector achieve a soft landing and boost its recovery.

A stronger-than-expected credit expansion in June was reported by PBOC on Tuesday, with increment in aggregate social financing — the total amount of financing to the real economy — coming in at 4.22 trillion yuan ($586 billion).

The figure was up by 2.67 trillion yuan compared with May and beat market expectations of 3.22 trillion yuan polled by market tracker Wind Info, though still down 985.9 billion yuan compared with the same period last year.

The PBOC said China's new yuan-denominated loans totaled 3.05 trillion yuan in June, up 229.6 billion yuan year-on-year.

Zhou Lanxu contributed to this story.