China extends loans for developers to end mortgage boycott
China regulators increased their efforts to persuade lenders to extend loans to qualifying real estate projects
China is trying to quell the protests that have erupted at 100 housing projects in 50 cities
China's banking index rose more than 1% on Monday after falling 7% to a more than two-year low last week
The troubled real estate market in China was exposed to new dangers as a rising boycott of mortgage payments on unfinished homes intensified. As a result, regulators increased their efforts to persuade lenders to extend loans to qualifying real estate projects.
On Sunday, the China Banking and Insurance Regulatory Commission (CBIRC), according to Bloomberg, told an official industry newspaper that banks should satisfy developers' financial demands where reasonable.
The China Banking and Insurance Regulatory Commission issued the advice in reaction to the boycotts, and it aims to speed up the delivery of homes to customers, reported Bloomberg quoting a newspaper report published by the regulator.
China is trying to quell the protests that have erupted at 100 housing projects in 50 cities, threatening to extend the real estate crisis to the banking sector. Last week, regulators met with banks to address the boycotts, and analysts have warned that if more house purchasers follow suit, the financial system's stability might suffer.
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The news has helped banking and real estate stocks recover some of their losses. China's banking index rose more than 1% on Monday after falling 7% to a more than two-year low last week. Chinese real estate equities increased by more than 2% on the mainland and over 5% in Hong Kong.
The recovery in Chinese banking stocks was also boosted by reports that China will speed the issuing of special local government bonds to replenish small banks' capital as part of steps to minimize risk in the industry.
By discouraging potential purchasers from buying homes, the boycotts over project delays also pose risks to the broader housing market. In recent months, the market has shown indications of stabilisation, with some experts predicting a reversal in the second half of the year.
According to the National Bureau of Statistics, output in the real estate industry, a crucial economic contributor, fell 7% year on year in the second quarter.
Meanwhile, the China Banking and Insurance News reported on Sunday that authorities had pushed banks to assist developer mergers and acquisitions in order to help stabilise the real estate market. According to the report, banks were also advised to strengthen communications with house buyers and defend their legal rights.
Commercial banks in China have reported overdue loans on unfinished houses totalling more than 2.11 billion yuan ($312 million) in credit at risk. According to GF Securities Co., the boycott might affect up to 2 trillion yuan of mortgages.
Though lenders have termed the situation manageable, concerns have remained given the sector's prominence. When construction, sales, and associated services are included, the real estate industry contributes to almost one-fifth of China's GDP. Property is also estimated to hold 70% of the country's middle-class wealth.