In the midst of a cash crunch, a Chinese city relaxes its rules for developers.
Chengdu, China’s second-largest city, has announced measures to make it easier for developers to sell houses, making it the first to ease restrictions on a sector that has been hammered by Beijing’s debt crackdown.
The statement comes after several real estate companies, including industry giant China Evergrande, have been thrown into financial turmoil in the last year as a result of China’s regulatory crackdown on speculation and debt.
They were unable to pay their debt obligations as a result of their inability to sell properties or borrow further funds.
However, the southwestern city announced on Wednesday that it will expedite approvals for home sales and property loans, as well as loosening limitations on the use of pre-sale funds.
The move makes Sichuan province’s capital the first to address challenges faced by developers, as officials face mounting pressure to control a crisis that some fear would strike the vital property sector.
Beijing has been showing hints of softening its stance on the property market, and in September the central bank urged finance executives to assist local governments in supporting the housing sector as China’s economy slowed to its slowest pace in decades.
The problems at Evergrande, which is drowning in a sea of debt totaling $300 billion and on the verge of collapse, have brought the issue into sharp relief, with many fearing that it could spill over into the larger Chinese economy and possibly globally.
Evergrande has so far been able to pay its lenders, avoiding a default, but there are still obstacles to overcome.
Kaisa Group, another developer, revealed a plan to postpone the repayment of some of its bonds, offering an exchange for at least $380 million in notes to avert a default.
“Continued tightening of governmental policy, repeated credit events, and deteriorating consumer confidence have resulted in temporary shut-down of various refinancing venues for the industry,” the firm said in a filing.
This “placed great pressure” on short-term liquidity, and the company’s current resources may not be sufficient to repay existing notes when they mature on December 7, according to the company.
Kaisa further stated that if the exchange is not successful, it will consider debt restructuring.
Its Hong Kong-listed shares climbed over 20% after trading resumed following a three-week hiatus.
On Thursday, Kaisa announced that it would sell a residential site in Hong Kong to a joint venture led by Far East Consortium. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.