Property shares rose in China on Monday on news that the government is looking to set up a 300 billion yuan ($44.4 billion) real estate fund to help stressed developers caught in a lingering debt crisis.
The fund – which will initially start with 80 billion yuan ($11.8 billion) – will pay for buy-ups of unfinished home projects, so they can be completed and then rented to citizens as part of a government plan to boost rental housing, according to a state bank official.
The real estate fund will be supported by China Construction Bank and the People’s Bank ofChina (PBOC), the person, who declined to be identified due to the sensitivity of the matter, said.
If the model works, other banks will follow suit with a target to raise up to 200 to 300 billion yuan, the official said.
The latest news propelled the Hang Seng Mainland Properties Index more than 5% early on Monday, and it was up 3.4% at midday. The CSI 300 Real Estate Index rose almost 2.0%.
The property market debt crisis has been a major drag on the economy over the past year, prompting authorities to offer a variety of support measures to stabilise the sector.
Financial information provider REDD first reported details of the real estate fund on Monday.
The fund would support more than a dozen property developers, including embattled China Evergrande Group, REDD reported, citing unidentified sources.
The fund has secured 50 billion yuan from China Construction Bank and a 30 billion yuan relending facility from the People’s Bank ofChina (PBOC), the report said, adding it could be upsized to between 200 to 300 billion yuan.
Regulators and local governments would select the developers eligible for support from the fund, REDD said, adding that the fund could be used to buy financial products issued by the developers or finance state buyers’ acquisitions of their projects.
Beijing is also considering a national policy for issuance of special bonds for shantytown redevelopment, the report said.