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Banks decide loan size for realty firms

China Daily, October 11, 2014 Adjust font size:

Banks in China can now decide the amount of loans extended to property developers after the central bank lifted the cap on such credit as part of measures to bolster the sluggish real estate market.

The People’s Bank of China has now authorized the headquarters of commercial banks to approve loans for property developments, The Economic Observer, a Beijing-based weekly newspaper, reported yesterday, citing sources from the central bank and top Chinese banks.

The banks can extend new property development loans based on their own decisions, the report said. But the loan-to-deposit ratio requirement still applies. Under the current stipulation, the total loans to be granted by a Chinese lender should not exceed 75 percent of its deposit base. Previously banks could only extend a maximum of 10 percent of the total lending to developers.

The Chinese central bank said at the end of last month that it will strengthen financial support to affordable housing projects and individual mortgages, and continue to back reasonable financing needs of property developers.

The Industrial and Commercial Bank of China, China Construction Bank and the Agricultural Bank of China, the top three lenders in the country, said that they will focus on providing loans for affordable housing projects in top-tier cities following the central bank’s policy easing, the newspaper reported, citing sources familiar with the matter.

Late last month, the Chinese central bank revised the definition of first-time home buyers to include those who want to buy a second property and have no outstanding mortgages. First-time buyers are entitled to preferential policies such as discounted rate and lower down payments.

It was the first time for the monetary authority to loosen lending rules for the country’s property sector since China tightened its grip on credit after stimulus packages to counter the 2008 financial crisis spurred overheating and speculation.

Prior to the central bank’s latest move, lenders in some low-tier Chinese cities had already adjusted policies to grant more home buyers lower interest rates.

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