China’s banking regulator has urged lenders to lend more to real estate developers as a growing number of homebuyers withhold mortgage payments on unfinished housing projects in 50 cities.
Angered by postponed deliveries of pre-sold homes, unclear delivery times and construction freezes, it was reported that homebuyers stopped paying for units already sold in at least 100 housing projects last week, according to data from industry groups and analysts.
The boycott has fueled fears of financial contagion in the country’s struggling real estate sector, which accounts for an estimated 18-30 percent of GDP and is a key growth engine in the world’s second largest economy.
China’s Banking and Regulatory Insurance Commission urged banks to “effectively meet the reasonable financing needs of real estate companies, vigorously support rental housing construction” and support project mergers and acquisitions, an official said in a state-run media interview released on Sunday.
They were also urged to “do a good job of customer service…adhering to contracts, fulfilling obligations and protecting the legitimate rights and interests of financial customers”.
These measures are necessary to “maintain the stable and orderly operation of the real estate market,” said the unnamed official.
Authorities launched a crackdown on the property sector’s excessive debt in 2020, which left giants like Evergrande and Sunac struggling to make payments and forcing them to renegotiate with creditors as they teetered on the brink of bankruptcy.
Regulators met with banks last week to discuss the growing boycott of consumer mortgages, Bloomberg News reported, as more major Chinese developers teeter on the brink of default.
The developments come at a time of slowing growth in China and weak property sales, raising the risk of stability ahead of the Communist Party’s 20th Congress in the fall, when President Xi Jinping is expected to win a third term.
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