China tightens credit on property projects

With the euphoria on Beijing Olympics over, Chinas central bank and banking watchdog have teamed up to curb possible risks posed by the over-heated commercial property sector that could threaten the nations creaky financial sector.     

The People's Bank of China (PBOC) and the China Banking Regulatory Commission (CBRC) have urged "rigorous credit management" on commercial property projects to curb possible risks that could threaten the banking sector.     

Analysts said the policy aimed at improving the property credit market with the central bank's resolution and devotion to implement the tight economic policy and the banking regulator's prevention against possible financial risk.     

The policy would have significant impact on property developers as financing would be more difficult.     

According to the joint-circular issued yesterday, no loan would be given to developers to cover land transfer costs. 

Loans for land reserve acquisition would be secured by property developers through the use of a mortgage and require a legal land use certificate.

The amount of the loan should be less than 70 per cent of the estimated value of the project.   

The credit period would be confined to two years, Xinhua news agency reported. Provision of credit would be more cautious to government-approved construction projects that hadn't started within a year after a land concession contract was signed.     

This would also apply to projects where its developed land area was less than one-third of the total or where the investment was less than a quarter of the total within a year after starting construction.