In the hope of fending off possible risks fuelled by sizzling property lending, China Banking Regulatory Commission (CBRC) has issued a new policy tightening bank credit in the real estate sector.

 

Under the new policy, financial institutions shall not grant loans to property development projects whose developers fail to raise 35 percent of the investment from their own resources.

 

The new policy also tightens lending to developers who are suspected of hoarding land and property to artificially enhance expectations of widespread sales.

 

The Chinese government has for some time been trying to rein in rocketing property investment by tightening land and credit supply, without obvious success.

 

The government is increasingly concerned that commercial banks might become the scapegoats if a real estate bubble were to burst.

 

For personal housing mortgage loans, the new policy suggests that banks will decide how much a borrower will have to put down based on their credit worthiness, instead of using a unified standard.

 

The CBRC said it will crack down on fraudulent mortgage loans, which have been employed by some developers to shift huge risks to banks.

 

Earlier, CBRC chairman Liu Mingkang said the regulatory body will launch a review of mortgage loans and lending to land reserve projects.

 

Official statistics show that property investment totaled 941.1billion yuan in the first seven months this year, an increase of 24 percent year-on-year.

 

Vacant commodity houses reached 121 million square meters in floor space, up 17.2 percent from last year.

 

(Xinhua News Agency August 17, 2006)