Policy fine-tuning in real estate may be necessary in 2025 for China to more effectively address debt risks facing developers, a crucial link in ensuring a steady economic recovery and preventing systemic financial risks, economists and analysts said.

Possible measures include launching a systematic policy plan that details the roadmap for risk disposal, supports debt restructuring of qualified real estate enterprises and optimizes housing delivery efforts, they said.

"To resolve real estate market risks, it is necessary to gradually shift from simply safeguarding housing project deliveries to fully supporting qualified enterprises," said Zhang Ming, deputy director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences.

Zhang said a "one company, one policy" risk resolution approach is necessary as some real estate enterprises have faced difficulties in getting finance and transferring funds across projects and regions, hampering the sustainable development of the property market.

For responsible, law-abiding developers, Zhang suggested taking a combination of measures to extend their debt maturities, reduce repayment obligations and enhance their capital via debt-to-equity swaps or new investments.

For the tiny proportion of smaller developers involved in illegal operations, bankruptcy liquidation in line with legal regulations is needed, said Zhang.

The Central Economic Work Conference in December decided to take the real estate sector as a crucial link in effectively preventing and defusing risks, calling for reversing the downturn of and stabilizing the property market.

China Real Estate Information Corp (CRIC) said capital market debt maturities of Chinese property developers are projected to reach 525.7 billion yuan ($72.5 billion) in 2025, 8.9 percent up from 2024. CRIC predicts that the third quarter will be a peak of debt repayments with maturities worth about 157.4 billion yuan.

Echoing Zhang's views, a China Index Academy report suggested a systematic risk resolution plan for property developers, with efforts so far having primarily focused on safeguarding real estate projects.

"A comprehensive plan aimed at addressing risks facing developers should be established, detailing methods, principles, supportive policy measures and coordination mechanisms for risk disposal."

To ensure that presold real estate projects have access to necessary funding, China introduced a real estate financing coordination mechanism last year.

Via the mechanism, Chinese banks had approved 5.6 trillion yuan worth of loans to property projects as of Jan 22, financing the delivery of 14 million homes, the National Financial Regulatory Administration said.

However, the total financing of 65 typical Chinese real estate enterprises in 2024 was 462.9 billion yuan, down 31 percent from 2023, according to CRIC.

Shi Lulu, director of Asia-Pacific corporate ratings at Fitch Ratings, said higher debt maturities, weakening sales, declining margins and reduced cash generation may continue in 2025 for many Chinese homebuilders.

The risk of sales failing to stabilize remains a key factor behind the negative ratings outlook or watch of some of Fitch's rated Chinese homebuilder issuers, Shi said, though it is expected that the magnitude of negative rating actions will abate as State-owned developers have maintained access to the onshore bond market.

"The most critical debt chain in the real estate sector lies between developers and homebuyers, rather than developers and banks or developers and foreign bond investors," said Lu Ting, chief China economist at Nomura.

Stressing the importance of rebuilding homebuyer confidence by ensuring that they will receive the homes they paid for, Lu said this does not always mean completing every building and requires active efforts by government departments.

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