New Finance Rules to Allow Property Firms to Sell Medium Term Notes
China is further relaxing its financing rules of listed property firms by allowing qualified ones to sell medium term notes in the interbank market. Revenues that are raised from the sale of these notes can be used to fund the new residential housing projects, operating cash flows, and to repay bank loans.
The slowdown in the housing market forced a cash squeezed on several developers, and based on a study that was conducted last June showed cash to short term debts ratios in 80 of the listed property companies are at their two year lows. And the country’s once heated property market is currently experiencing the sharpest slowdown in the two years as prices and sales have turned south after 2013. As sales slowed and new construction dropped sharply along with banks turning more cautious in lending to developers and home buyers.
This is also another signal that the government supports of the property industry, and is also assisting banks in diversifying risks from loans. Those qualified developers must focus on the sale of medium and small sized homes in the future. And the new easing is expected to benefit domestically listed real estate companies more due to onshore borrowings.