In order to implement the decisions and arrangements of the CPC Central Committee and the State Council on promoting the stable and healthy development of the real estate market, fully leverage the role of commercial property loans, and meet the reasonable financing needs of real estate enterprises, the General Office of the People's Bank of China and the General Office of the National Financial Regulatory Administration recently jointly issued a notice on strengthening the management of commercial property loans.

The notice specifies that commercial property loans refer to loans issued by commercial banks to enterprise legal persons that hold commercial real estate which has passed completion acceptance, has obtained the real estate ownership certificate, and has been put into operation with relatively good comprehensive benefits, with the commercial property as collateral, and the actual use of funds directed toward the property itself or real estate-related fields. Commercial real estate includes but is not limited to commercial complexes, shopping centers, business centers, office buildings, hotels, cultural and tourism real estate projects, etc., and excludes commodity housing and rental housing.

The notice refines the requirements for commercial banks' commercial property loan business management, including scope, term, amount, and use. It specifies that before the end of 2024, for real estate development enterprises operating in compliance and with good development prospects, national commercial banks, on the basis of controllable risks and commercial sustainability, may, in addition to issuing commercial property loans for operating capital needs related to the property itself and for replacing loans and shareholder borrowings formed in the construction and purchase of properties, also issue commercial property loans to repay the outstanding real estate-related loans and public market bonds of real estate development enterprises and their group holding companies (including consolidated subsidiaries).

Commercial banks shall reasonably determine the amount of commercial property loans based on factors such as the operating conditions and appraised value of the property serving as collateral, as well as the debt-servicing capacity, credit status, and guarantee methods of the borrower and its group company. In principle, the amount of a commercial property loan shall not exceed 70% of the appraised value of the property serving as collateral. Commercial banks shall, in light of factors such as the operating conditions of the property serving as collateral and in accordance with market principles, negotiate with borrowers to determine loan interest rates and repayment methods for principal and interest. The term of a commercial property loan generally shall not exceed 10 years and shall not exceed 15 years at the longest, and the loan maturity date shall be at least 5 years earlier than the expiration date of the property ownership certificate of the property serving as collateral.

The **repayment source** of a commercial property loan shall be the operating income of the property serving as collateral itself. Commercial banks shall agree with borrowers in the loan contract on a fund management account, and in principle all operating income of the property serving as collateral shall enter this account and be used preferentially to repay the principal and interest of the current loan. Commercial banks shall strengthen monitoring of the operating income and expenditure of the property serving as collateral to ensure the safety of credit funds.

Commercial banks issuing commercial property loans shall use the property serving as collateral as mortgage collateral. The appraised value of the property shall be prudently determined in light of the value appraisal by third-party appraisal companies and other factors. Where the borrower is inconsistent with the actual operating and management entity of the property serving as collateral, the actual operating and management entity of the property serving as collateral may be treated as a co-borrower or joint and several liability guarantor.