Recently, the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration jointly issued a notice requiring localities to establish a city-level real estate financing coordination mechanism, promptly assess the local real estate market situation and real estate financing needs, and coordinate efforts to resolve difficulties and problems in real estate financing. This is a major piece of news for China's real estate sector as it enters 2024.

Multiple localities actively promote the implementation of the real estate financing coordination mechanism

At present, many localities have begun taking active steps to implement the real estate financing coordination mechanism. After receiving the relevant notice, Jiangxi launched related work at the earliest opportunity, setting out to establish provincial- and city-level real estate financing coordination mechanisms and further refining and clarifying the implementation measures and detailed rules for the city-level financing coordination mechanism. At the same time, it also launched the construction of two platforms. One is a departmental consultation platform, convened by the leader in charge of the city government, with the housing and urban-rural development department, the dispatched offices of the National Financial Regulatory Administration, the natural resources department, the tax department and other departments participating in a coordinated manner. The other is a government-bank-enterprise cooperation platform, which promotes precise matching and better collaboration between real estate enterprises and financial institutions to meet the reasonable financing needs of real estate enterprises.

On this basis, real estate financing in Jiangxi will in the future rely strictly on three lists: a list of projects under normal development and construction with sufficient collateral, reasonable assets and liabilities, and guaranteed sources of repayment; a list of projects that have temporarily encountered difficulties in development and construction but whose funds are basically balanced; and a list of enterprises and projects with major violations of laws and regulations, evasion of financial debts, and other problems. For projects under normal development and construction, a green channel for credit granting will be established to actively meet reasonable financing needs; for projects with temporary difficulties, support will be provided on a "one project, one plan" basis through methods such as loan extensions, adjusted repayment arrangements, and new loans; for enterprises and projects with violations of laws and regulations and other such problems, financial institutions will be reminded to conduct credit granting prudently.

In Chongqing, the local authorities are currently preparing the detailed rules for the Chongqing real estate financing coordination mechanism, which will then form the first batch of "whitelists" of real estate projects. This list focuses on the projects themselves, examining whether their assets and liabilities are reasonable, whether the projects can achieve sustainable operation, and whether they have sufficient sources of repayment, so as to separate them from the risks of their original group companies. This makes the approach more precise and conducive to project financing.

It is reported that next, Chongqing will tighten the territorial responsibilities of districts and counties, the departmental responsibilities of industry authorities, the social responsibilities of financial institutions, and the primary responsibilities of enterprises, build a government-bank-enterprise communication platform, precisely match project financing needs, and jointly advance the implementation of real estate project financing.

Real estate financing from multiple banks continues to grow

It is not only relevant local government departments that have taken action; various banking financial institutions have also moved quickly recently. The real estate development loan disbursements of multiple banks have increased month by month, and the reasonable financing needs of more and more real estate enterprises have been met.

Tian Jianming, deputy general manager of the Corporate Banking Department of China Construction Bank, said that they have now exchanged information with six real estate enterprises, enhancing mutual trust. Recently, the head office also sent six teams to 12 provinces and cities to conduct research. Preliminary research shows that many of the main problems currently facing real estate enterprises are liquidity problems, so, on the basis of steadily increasing real estate credit disbursement last year, China Construction Bank has further accelerated its response to reasonable financing needs.

In addition, multiple banks, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Zheshang Bank, have held bank-enterprise symposiums since December last year to support the reasonable financing needs of real estate enterprises, and subsequently increased financial support.

Multiple banks will establish green approval channels for real estate enterprise loans

Multiple banks also said that next they will set up dedicated working teams to further strengthen funding support for the reasonable financing needs of real estate enterprises. At the same time, they will accelerate the establishment of green channels for real estate enterprise loan approval and shorten approval timelines.

Industrial and Commercial Bank of China will, in accordance with the requirements of the coordination mechanism, further strengthen precise matching with various types of real estate enterprises, improve the bank's internal green approval channels, optimize approval processes, and shorten approval timelines. It will increase financing support for projects on the list and meet the reasonable financing needs of real estate enterprises of all ownership types without discrimination.

China Construction Bank, for supported projects pushed by the coordination mechanism, will launch business processes as soon as possible, provide financing services as soon as possible, and achieve completion and delivery as soon as possible; for projects with temporary difficulties but whose funds are basically balanced, loans will be extended where they should be extended and increased where they should be increased, so as to stabilize the funding chain, stabilize construction progress, and stabilize market confidence.

Multiple banks also said that in the future they will better support rigid and improvement-type housing demand and increase financial support for the construction of the "three major projects": affordable housing, urban village renovation, and "dual-use for normal and emergency purposes" public infrastructure.

Industrial and Commercial Bank of China said that since November 2023, its development loan disbursements to non-state-owned real estate enterprises have increased month by month. By the end of 2023, ICBC's outstanding real estate development loans exceeded one trillion yuan, achieving a year-on-year increase in disbursement.

The coordination mechanism focuses on meeting reasonable financing needs

The Ministry of Housing and Urban-Rural Development said that, in view of the current situation in the real estate market, the tight cash flow of real estate enterprises is mainly due to two reasons: one is market demand, and the other is enterprise financing. Therefore, the key purpose of the notice issued this time is to solve the financing problem.

In the view of industry insiders, this policy is quite targeted. In particular, the real estate financing coordination mechanism it proposes to establish does not treat real estate enterprises as the support target, but emphasizes providing financing support based on real estate projects.

Pu Zhan, deputy director of the Policy Research Center of the Ministry of Housing and Urban-Rural Development, believes that the notice clearly states that the intervention of the coordination mechanism led by city governments will help solve the problem of excessive tightening of financing caused by excessive risk aversion among financial institutions. At the same time, by building a bank-enterprise communication platform, it reduces the impact of information asymmetry and helps solve the problem of "collateral damage" to normal development projects caused by excessive tightening of financing. According to the requirements, the coordination mechanism will, based on the development and construction status of projects and the qualifications, credit, and financial conditions of development enterprises, propose whitelists of real estate projects eligible for financing support and push them to financial institutions.