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

Strict lending rules were introduced in 2020 to tackle the unbridled borrowing of property developers.

Bloomberg News reports that China is planning to relax loan restrictions on property developers to support the struggling sector by reverting to its “three red lines” policy.

The “three red lines” policy announced in August 2020 aims to tackle property developers’ over-borrowing by limiting the number of new loans they can raise each year. .

Beijing may allow some real estate firms to gain more leverage by easing borrowing limits and pushing back grace periods to meet debt targets set by the policy. Regulators could also extend the deadline by at least six months, which was originally June 30, the report said, citing people familiar with the matter.

Under the new proposal, China would relax restrictions on debt growth for developers depending on how many red limits they meet, loosening loan limits for companies that meet all three thresholds. , the report added.

China’s real estate sector, which accounts for a quarter of the economy, was hit hard last year when cash-strapped developers were unable to complete the construction of the apartments, prompting some buyers to boycott mortgages. Some of the country’s biggest developers have also defaulted on debt and are caught up in lengthy restructuring talks.

To support the sector, policymakers have announced a variety of measures in recent months including making it easier for developers to raise new capital, extending debt repayments and providing more support for buyers. home. However, analysts expect the recovery to be lengthy and bumpy.

The “three red lines” metric puts limits on debt-to-cash, debt-to-asset, and debt-to-equity ratios, and requires property developers to provide more details on liabilities. their.


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