Chinese city eases rules for developers amid cash crunch

Chinese city eases rules for developers amid cash crunch

A debt crackdown by Beijing has left many developers unable to complete or sell properties, making it harder for them to meet their debt obligations
A debt crackdown by Beijing has left many developers unable to complete or sell properties, making it harder for them to meet their debt obligations

BEIJING - 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 following a debt crackdown by Beijing.

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

That left them struggling to meet their debt obligations owing to the fact they could not offload properties or borrow more cash.

But 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 move makes the capital of Sichuan province the first to address problems developers are facing, as officials face growing pressure to take control of a crisis some fear could hammer the crucial property sector.

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

The crisis has been brought into stark relief by the struggles at Evergrande, which is drowning of a sea of debt worth $300 billion and facing collapse, a situation many fear could spill into the wider Chinese economy and possibly globally.

Evergrande has so far managed to pay its debtors, 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, offering an exchange for at least $380 million of notes to avoid a potential default.

The firm said in a filing that "persistent tightening governmental policy, multiple credit events and deteriorating consumer sentiment have resulted in temporary shut-down of various refinancing venues for the sector".

This also "put enormous pressure" on short-term liquidity, and its existing resources could be insufficient to repay existing notes at maturity on December 7, the company added.

If the exchange is not successful, Kaisa added that it would consider a debt restructuring.

Its Hong Kong-listed shares soared almost 20 percent as trading in them restarted after a three-week suspension.

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

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