China’s financial regulator will allow property developers to access some pre-sale housing funds, it said in a notice published on Monday, the latest move to ease a liquidity crunch which has plagued the real estate sector since mid-2020.
The notice follows an extensive package outlined by Chinese regulators to shore up financing in the struggling property sector. Chinese property stocks and bonds surged on Monday as the market cheered the measures.
Commercial banks are allowed to issue letters of guarantee to real estate firms for escrow pre-sale housing funds, according to the notice published by China’s Banking and Insurance Regulatory Commission (CBIRC).
The funds obtained by real estate companies from escrow funds accounts shall be prioritised to construct projects and repay debts, said the notice.
Real estate companies are banned from using the funds for land acquisition, new investment or repayment loans by shareholders.
Property developers can sell residential projects before completing them but are required to put those funds in escrow accounts.
China’s property sector, contributing roughly a quarter of China’s $17 trillion of output, has struggled with defaults and stalled projects, hitting market confidence and weighing on growth.
Previous efforts by policymakers to help ease the cash crunch have done little to bolster the property market.