(Bloomberg) -- China is ramping up support of the embattled real estate sector as growing stress in the industry threatens to deepen an economic slowdown.
Authorities are encouraging banks to fund acquisitions of projects of distressed developers and pushing financially healthy property firms to make such purchases, the central bank-backed Financial News reported Monday.
China is also providing credit support to an economy showing strain from the property slump, with domestic banks on Monday lowering borrowing costs for the first time in 20 months. The move follows action by the People’s Bank of China earlier this month to cut the amount of cash banks must hold in reserve, freeing up 1.2 trillion yuan ($188 billion) of cheap long-term funds for lenders.
The support measures come as some developers such as Kaisa Group Holdings Ltd. and China Evergrande Group struggle to sell assets to raise cash and service mounting debts amid a crackdown on leverage in the industry. Regulators have eased up on the clampdown in recent weeks, such as by encouraging stronger real estate firms to tap the onshore interbank bond market for financing.
Lenders will be urged to help “quality” developers acquire projects of large developers faced with difficulties, the Financial News report said, citing a notice from the central bank and the nation’s banking regulator.
The PBOC didn’t immediately reply a fax seeking comment.
The report also said the PBOC and the country’s state-asset watchdog held a meeting recently with some large private and state-owned real estate companies to encourage them to acquire quality projects from distressed developers.
Financial authorities have asked lenders not to “blindly” call back or cut off loans to struggling developers, it added.
Highly leveraged developers will look to dispose of assets and this present opportunities for onshore capital, investment and fund managers, according to Jones Lang LaSalle Inc.’s Asia-Pacific Chief Executive Officer Anthony Couse.
“The Chinese government will look with that controlling hand to support some of those developers as they divest assets to meet payments and look at corporate restructuring,” Couse said Monday in an interview on Bloomberg Television.
Sunac China Holdings Ltd., the nation’s fourth-biggest builder by sales, recently sold two real estate projects to rival Hangzhou Binjiang Real Estate Group Co. as part of efforts to recoup cash.
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