Local state-owned enterprises would be asked to help purchase unsold homes from distressed developers at steep discounts using loans provided by state banks,according to two of the people. Many of the properties would then be converted into affordable housing.
Officials are still debating details of the plan and its feasibility,the people said,adding that it could take months to be finalised if China’s leaders decide to go ahead. The housing ministry didn’t respond to a request for comment.
If authorities do proceed,it would mark a new phase in the government’s closely watched campaign to address the biggest drag on the world’s second-largest economy. China’s home sales plummeted about 47 per cent in the first fourth months and unsold housing inventory is hovering at an eight-year high,exacerbating a meltdown that threatens to put about 5 million people at risk of unemployment or reduced incomes.
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The plan can “inject liquidity to developers directly and improve their financial situation,as well as immediately digesting excess inventory,” said Raymond Cheng,head of China property research at CGS International Securities HK. “This is all win situation. Of course,it needs a lot of funds - at least 1 trillion yuan to make the impact more meaningful.”
Shujin Chen,head of China financial and property research at Jefferies Financial Group,estimated at least 2 trillion yuan ($277 billion) of investments would be needed.
Investors have been awaiting details of the government’s next moves after the ruling Communist Party on April 30 vowed to explore new approaches to ease the real estate crisis. The Politburo,composed of China’s 24 most-senior leaders,said the country was studying ways to “digest” the existing stockpile of homes.