Chinese city to start building stalled housing projects amid mortgage boycott

THE Chinese city of Zhengzhou vowed to start building all stalled housing projects within 30 days, by making good use of special loans, asking developers to return misappropriated funds, and encouraging some real estate firms to file for bankruptcy, said 3 sources with knowledge of the matter.

"The goal is to achieve sustained construction on all suspended property projects in Zhengzhou by Oct 6," said a government notice dated on Tuesday (Sep 6).

Real estate firms must pledge valid assets to local government-backed financing companies if they want to get the special loans, 1 source cited the notice as saying.

Homebuyers in at least 80 cities have threatened to halt making mortgage payments since late June as developers stopped building projects due to strapped liquidity or strict Covid-19 restrictions.

The mortgage boycott has added to worries about a prolonged slump in China's property market, which has lurched from crisis to crisis since the summer of 2020 after regulators stepped in to cut excess leverage.

Some developers are encouraged to apply to the court for bankruptcy to ensure that the disposal of insolvent property developments is completed as soon as possible, 1 source cited the notice as saying.

"It's good, but the move will save housing projects, not the developers."

Real estate firms should do everything possible to ensure project delivery, by raising funds through disposal of undeveloped lands, assets and equities, and returning misappropriated funds, according to the notice.

Zhengzhou government didn't immediately respond to Reuters' request for comments.

Local governments, including the central province of Hubei, have taken steps to prop up the property market by setting up local bailout funds.

Zhengzhou was 1 of the first cities to do so, setting up a bailout fund worth 10 billion yuan (S$2.1 billion) in July. The city government has proposed ways to several big developers to resolve the unfinished-home issue, including through loans, mergers and acquisitions, as well as turning the projects into subsidised rental housing, local media have reported. REUTERS

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