China has relaxed a key financial requirement for commercial property developers to proceed on new products, according to a recent report in the China Daily. The policy changes, which lowers the ratio of capital to costs, is hoped to ease developers’ capital strain and lead to a more stable market.
The State Council announced that the minimum capital requirements for starting a new commercial property or an affordable housing project had been lowered from 35 percent of the total cost to just 20 percent. That is the lowest it’s been in 13 years and is seen as a major adjustment in the government’s policies. The reduction means that developers now have to meet a lower threshold when applying for bank loans.
The deputy head of the school of economics at Renmin University, Liu Yuanchun, believes that the market should recover over the second half of 2009, thanks in part to the measure: “The 15 percentage points reduction in financial requirement ratio is expected to release 300 billion yuan (about 43.92 billion U.S. dollars) for investment in new property projects.”
China’s property market grew by 4.1 percent in the first quarter of 2009, which was a 28.2 percent drop from a year earlier.
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