Chinese city makes it easier for developers

Chinese city makes it easier for developers

The Chinese city of Chengdu has announced measures to make it easier for developers to sell properties, making it the first to loosen restrictions on the sector that has come under intense pressure after a debt crackdown by Beijing.

The announcement came after several real estate companies led by China Evergrande plunged into financial crisis in the past year after China embarked on a regulatory drive to bring an end to speculation and leverage.

They were struggling to meet their debt obligations due to the fact that they could not offload properties or borrow more cash.

On Wednesday, the southwestern city said it would speed up approvals for home sales and property loans, while easing restrictions on the use of pre-sales proceeds.

The capital of Sichuan province is one of the first to address problems developers are facing, as officials face growing pressure to take control of a crisis that could hammer the crucial property sector.

In September the central bank called for financial chiefs to help local governments to support the housing market as the growth in the Chinese economy slows to its weakest pace in decades, despite Beijing showing signs of stepping back from their tough line on the property industry.

The crisis has been brought into sharp relief by the struggles at Evergrande, which is drowning of a sea of debt worth $300 billion and facing collapse, a situation that many fear could affect the Chinese economy and possibly the world as a whole.

Evergrande has managed to pay its debts, helping it avoid a default, but challenges remain.

Another developer, Kaisa Group, announced a plan to put back the repayment timeline for some of its bonds, and offer an exchange for at least $380 million of notes to avoid a potential default.

The firm said in a filing that persistent tightening government policy, multiple credit events and deteriorating consumer sentiment have resulted in a temporary shut down of various refinancing venues for the sector, which put enormous pressure on short-term liquidity, and its existing resources could not be able to repay existing notes at maturity on December 7, a decision that could put enormous pressure on short-term liquidity.

If the exchange is not successful, Kaisa said it would consider debt restructuring.

After a three-week suspension, the Hong Kong-listed shares soared by almost 20 percent.

A separate statement on Thursday showed that Kaisa would sell a residential site in Hong Kong to a joint venture between Far East Consortium International and New World Development.