Financial regulators have instructed a few lenders in the republic to issue more loans to property firms for project development. This was revealed by two sources within the sector with direct knowledge of the situation. The sources revealed that this is part of a move by regulators to ease liquidity strains across the real estate sector.
Chinese authorities have given no indication whatsoever that a plan to relax the “three red lines” is coming up anytime soon. Three red lines is the term used to refer to the financial measures introduced by the apex bank last year requiring developers to meet certain criteria to get new bank loans.
However, banks have recently adapted their lending practices to reflect the latest apex lender guidance which requires that they “meet the normal financing needs” of the sector.
Though there is a slight relaxation, loan policies to developers will still abide by the major principle that “homes are for living in, not for speculation,” said the sources cited by Reuters. One of them is said to work at a commercial bank while the other works for a big bank, which received guidance from regulators.
This directive by financial regulators charged lenders to specifically speed up the approval of loans to develop projects and to make certain that outstanding loans to project development show positive growth in their loan books in November compared with October.
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