A city of 4 million people in southern China has moved to relax rules on property developers’ escrow accounts and boost financial support for the real estate sector.
Zhaoqing, in Guangdong province, is believed to be the first municipality to introduce guidelines specifically to help developers’ liquidity, a move that officials said other cities may follow.
Despite repeated assurances by the Chinese policymakers and regulators to shore up the property sector, developers have said access to funding remained challenging, and many local government authorities were reluctant to ease rules.
In an official announcement this week, Zhaoqing’s housing authority said local regulators should release funds “appropriately” from escrow accounts to developers facing a short-term liquidity crunch.
That would ensure they have sufficient capital to complete project construction.
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The authority also said developers in stronger financial positions would be able to reduce the amount required for escrow accounts to ease funding pressures.
Echoing pledges by top policymakers, the city urged financial institutions to support the “reasonable” financing need of developers.
“We think these measures, if implemented, are helpful to developers, especially that this is the first time that we see measures targeting … problem developers,” CGS-CIMB Securities head of China research Raymond Cheng wrote in a note.
“We expect to see more local cities to follow suit,” he added.
So far this year, more than 100 cities have introduced regulatory easing measures as an effort to bolster the property market, but most focused on boosting home purchase demand through cuts in mortgage rates, smaller down-payments and subsidies.
- Reuters, with additional editing by George Russell
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