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China’s Real Estate ‘3 Major Requirements’, Supporing Developers Loan Needs

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Finance Mandarin Real Estate Finance Case Study
房地产融资白名单：三个不低于, 避免“垒大户” 与“一刀切”

Background

Since November 21, 2023, China financial institutions have been actively engaging with real estate companies in business discussions. Dozens of companies have participated in these meetings.


New Policy Outline

• Benchmarking Loan Growth: Financial regulators have proposed three minimum standards:

• Banks must maintain real estate loan growth rates at least equal to the industry average.
• Loan growth for private real estate companies must not fall below the bank's overall real estate growth rate.
• Mortgage growth for private real estate companies must match the bank's overall mortgage growth rate.

• Specific Bank Strategies:
• ABC plans to focus on commercial housing, rental housing, and urban renewal. They intend to deepen cooperation in areas such as real estate development loans, personal housing mortgages, business property loans, mergers and acquisitions financing, and bond underwriting and investment.
• CCB will implement a "3+2" mechanism for supporting real estate companies in the public domain and retail credit in housing scenarios. This includes establishing dedicated work teams, exclusive approval channels, and special asset-liability management plans. They commit to equal support for real estate companies of different ownership structures and prioritize "Three Major Projects."


• Communication and Collaboration:
• Banks have discussed specific needs and cooperation points with real estate companies, including credit limits, bond issuance, supply chain finance, and cross-border operations.
• Market Stabilization Efforts:
• Zhejiang Merchant Bank focuses on stabilizing financing channels like credit and bonds and actively works on ensuring project completion.
• Financial institutions aim to understand the credit needs of quality real estate companies by year-end, bolstering market confidence and aiding in the banks' credit project reserves for 2024.
• Diverse Participation and Problem-Solving:
• Participating companies include various ownership types, from mixed-ownership like Vanke to private companies like Longfor and Midea Real Estate.
• Commercial banks are addressing the financing challenges of private real estate companies, accelerating the resolution of their reasonable demands, and increasing financing support.
• Impact on the Industry:
• These measures are expected to improve the financing environment for private real estate companies, positively influence industry expectations, and accelerate the return to normalization.
• Current Trends:
• Large banks still have a high proportion of development loans in the public domain and personal housing mortgages.

Finance Mandarin Real Estate Finance Case Study Analysis:

This case provides an in-depth look at how policy shifts and strategic collaborations between banks and real estate companies can influence market dynamics. Students should analyze the potential impacts of these policies on different stakeholders, assess risks and opportunities for banks and real estate firms, and explore strategic recommendations for these entities in response to the changing financial landscape. The focus should be on understanding the balance between regulatory compliance, market stabilization, and growth strategies in a volatile market.

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