China may signal more policy adjustments to stabilize the real estate market as a regulatory official recently noted that "bubble signs and the financialization trend in China's real estate sector have been substantially reversed", experts said.

Industry experts are interpreting the official's comment as an affirmation by the nation's top banking and insurance regulator of continuous deleveraging actions of property developers in the past two years.

In China, financialization in the real estate sector refers to some property developers' forays into various kinds of financial services, in order to build themselves into diversified, tightly knit conglomerates.

In August 2020, China unveiled the "three red lines" to constrain property developers' debt according to three balance sheet metrics, said Ma Hong, senior research fellow at the Zhixin Investment Research Institute.

Under the orderly arrangements made by local governments that are tasked with ensuring that responsibilities are fulfilled by all stakeholders, the China Banking and Insurance Regulatory Commission guided banks to take an active part in finding real estate funding solutions, grant credit to qualified home developers, and take various measures to promote action for timely delivery of presold homes, said the CBIRC official on Friday.

The regulator cooperated with other government departments, including the Ministry of Housing and Urban-Rural Development, the Ministry of Finance and the People's Bank of China, the central bank, to launch measures promptly, improve the policy toolbox, and use special loans offered by policy banks to support timely delivery of presold homes that are overdue and difficult to deliver in an effort to protect the legitimate interests of homebuyers and maintain the big picture of social stability, said the regulatory official.

China Development Bank, a policy financial institution, offered the nation's first special loan to the city of Shenyang in Liaoning province on Thursday, to ensure timely delivery of presold homes in the province, said the official.

The CBIRC swears by the principle "houses are for living in, not for speculation", and is focused on the goals of stabilizing land prices, housing prices and expectations, continuously improving long-term mechanisms for real estate financial management, satisfying the reasonable financing needs of the real estate market, and properly handling risks of some leading property developers such as China Evergrande Group, said the official.

Ma at the Zhixin Investment Research Institute said, "The official's remarks may provide clues to the moderate improvement of financing convenience for property developers at the end of this year and may signal further policy adjustments to stabilize the real estate market."

On Friday, China Construction Bank Corp, a large State-owned commercial lender, said it plans to establish a house rental fund of 30 billion yuan ($4.19 billion). The bank itself will contribute 29.999 billion yuan to the fund, and a wholly owned subsidiary of CCB Trust Co, a subsidiary of the bank, will contribute 1 million yuan.

Through investments in the existing assets of real estate enterprises and by transforming them into rental housing, the fund aims to increase the supply of market-oriented long-term rental housing and government-subsidized rental housing, and explore a new model of real estate development for both rental housing and homebuying. The term of the fund is 10 years provisionally, with scope for assessment of continuity at its expiry, CCB said.

S&P Global (China) Ratings, a wholly foreign-owned credit rating agency in the domestic market, said in a recent report: "We believe that under the overall direction of ensuring timely delivery of presold homes and stabilizing people's livelihoods, the majority of the problems associated with unfinished homes and homebuyers' refusal to pay mortgages on such homes will be properly settled eventually. It will not lead to a sharp increase in default risks at small and medium-sized banks."

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