(Bloomberg) -- A Chinese city rolled out a series of easing measures to boost liquidity at property developers, becoming the first major local government to address a cash crunch engulfing the real estate industry.
Chengdu, the capital of the southwestern province of Sichuan with a population of about 21 million, will accelerate approvals for home sales and property loans as well as ease restrictions on using proceeds from pre-sales, according to a statement by the local housing authority late Wednesday.
Embattled developer China Evergrande Group rose as much as 6.1%. Shares of Chengdu-based Sichuan Languang Development were little changed.
“Chengdu is the first city authority to call for faster property-related loans in a clear official statement,” Yan Yuejin, research director at Shanghai-based E-house China Research and Development Institute, said. “We may see other initiatives to press banks on faster mortgages soon.”
China’s home slump deepened last month as declines in prices, sales and property investments widened, adding pressure on authorities to stabilize the market. New-home values in Chengdu declined 0.6% in October from a month earlier, the widest slump in four and a half years, official data showed.
Regulators are fine-tuning their long-running crackdown on the property sector after a credit crunch at Evergrande and other junk-rated developers began spreading to higher-rated peers. In late September, the central bank urged financial institutions to help local governments stabilize the rapidly cooling housing market and ease mortgages for some homebuyers. Official media reported in recent weeks that faster mortgages are already on the way.
“It shows how the city government cares about developers’ liquidity risks,” said Pan Hao, a property analyst at KE Holdings Inc., adding that Chengdu is looking at different measures to prevent developers’ cash risk from blowing up. The policies will help to get revenue flowing at quality developers, SWS Research analysts including Yuan Hao wrote in a note.
Here are some of Chengdu’s key measures allowing developers to boost cash:
- The housing authority vowed to shorten the time for compulsory pre-sales procedures by at least a third
- Developers will be able to use proceeds from pre-sales if they meet certain construction progress
- Chengdu will work with financial institutions to increase credit quotas for developers and accelerate loan approvals
- The city said it will coordinate with banks to extend property development loans for key developers
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