China may ease ‘three red lines’ property rules: Bloomberg | Property

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Strict lending rules have been introduced in 2020 to deal with reckless lending by real estate developers.

China plans to curb loans to real estate developers to support the troubled sector by rolling back the “three red lines” policy, Bloomberg News has reported.

The “three red lines” policy was unveiled in August 2020 to tackle excessive borrowing by property developers by limiting the amount of new borrowing they can raise each year.

Beijing may allow some property companies to add more leverage by reducing loan caps, and push back the grace period for meeting the debt targets set by the policy. Regulators could also extend the deadline by at least six months, which was initially on June 30, the report said citing people familiar with the matter.

Under the new proposal, China will ease restrictions on debt growth for developers depending on how many red lines they meet, easing loan caps for companies that meet the three thresholds, the report said.

China’s property sector, which makes up a quarter of the economy, was hit hard last year as cash-strapped developers were unable to finish building apartments, prompting a mortgage boycott by some. – shopping. Several of the country’s biggest developers have also defaulted on their debts and are engaged in long-term restructuring talks.

To support the sector, policymakers have announced a number of measures in recent months including making it easier for developers to raise new funds, extending loan repayments and more assistance to home buyers. But analysts expect the recovery to be long and bumpy.

The “three red lines” metric put caps on debt-to-cash, debt-to-assets and debt-to-equity ratios and required property developers to provide more detail about their debt .

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