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Property development loans may ease

By Ding Qi (chinadaily.com.cn)
Updated: 2008-07-24 09:27

For many property developers that have suffered tightening credit policies in the past months, the toughest days may have passed.

Banks are beginning to ease loan policies toward small and medium sized real estate companies, sources said.

"Previously, commercial banks wouldn't agree to lend if a property firm or its project failed to satisfy all the qualifications and borrowing terms. But now, as long as key requirements are met, the other terms are negotiable," sources told Shanghai Securities News recently.

According to a manager from a bank's corporate credit department, property developers, especially qualified small and medium ones, can now acquire bank approval of loans more easily. The manager has just released a multi-million-yuan loan to a small property firm in Zhejiang province.

"There must be some flexible policies on the way to support these property firms," he said.

Insiders from the banking sector said a record-high reserve requirement ratio has restrained the liquidity of bank funds and made big-sum loans risky. In contrast, small and medium sized developers borrow less and can recollect funds via flexible sales, which makes them more welcome by banks.

Other industry experts noted that supporting small and medium sized enterprises has always been the nation's policy. In addition, a breakdown in the cash chain of smaller developers will bring them a fatal attack and lead to credit risks for banks.