To implement the spirit of the Central Economic Work Conference and the Central Financial Work Conference, and to meet the reasonable financing needs of real estate enterprises of all ownership types on an equal basis, the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration recently jointly issued the "Notice on Establishing a City-Level Real Estate Financing Coordination Mechanism," establishing a real estate financing coordination mechanism that takes cities as units and projects as the main body, so as to actively and steadily defuse real estate risks and promote the steady and healthy development of the real estate market.
Adhere to city-specific policies and establish a coordination mechanism with cities as units. To prevent and defuse real estate risks, real estate enterprises must bear the primary responsibility, and city governments must bear territorial responsibility. Due to the immovable property nature of real estate, the real estate market has obvious regional characteristics with cities as units, and there are significant differences in the real estate market situation, the development and construction status of real estate projects, and the connections with financial institutions across different localities, necessitating city-specific policies. The Notice proposes that cities at the prefecture level and above establish a real estate financing coordination mechanism headed by the responsible comrade of the city government in charge of housing and urban-rural development, with the local housing and urban-rural development department, the dispatched agency of the National Financial Regulatory Administration, and other units as member units, to guide financial institutions within their administrative regions to connect with real estate projects within their administrative regions. This will help strengthen cities' territorial responsibility, consolidate enterprises' primary responsibility, give play to city governments' leading and coordinating role, and, in light of local realities, research and formulate measures suited to local conditions to meet the reasonable financing needs of local real estate projects.
Adhere to targeted policies and provide financing support with projects as the main body. Real estate enterprises generally adopt a "group company + project company" structure, and both the group company and the project company are independent legal persons. A debt default by the group company does not mean that the project company stops development and operation. If financial credit support for project companies is contracted on the grounds that the group company has defaulted on its debts, it will further aggravate the difficulties of enterprises and may even affect the normal delivery of projects under construction. The establishment of the city-level real estate financing coordination mechanism is conducive to distinguishing group company debt risks from project development and operation risks, with cities proposing lists of real estate projects eligible for financing support, adopting "one project, one plan," and more precisely supporting the reasonable financing needs of projects, preventing delivery defaults in projects under construction, and safeguarding the legitimate rights and interests of homebuyers. This is also conducive to correcting the mistaken social perception that a group company's debt default is equivalent to a "capital chain rupture" or a complete shutdown of the enterprise, and to avoiding a crisis of confidence.
Adhere to systematic policies and promote a virtuous cycle between finance and real estate. The deep-seated reason for the distress of real estate enterprises in this round is the imbalance in the relationship between finance and real estate. For a fairly long period in the past, various types of funds were excessively concentrated in the real estate industry, and some real estate enterprises operated with "high debt, high leverage, and high turnover," displaying characteristics of excessive financialization and accumulating hidden risks. In recent years, due to the distress of some leading real estate enterprises, financial institutions have uniformly contracted and taken risk-averse actions, and some leading real estate enterprises have successively defaulted on their debts. The establishment of the city-level real estate financing coordination mechanism is conducive to strengthening systematic thinking, prompting financial institutions to change their uniform contraction behavior, providing classified and reasonable financing support to real estate projects, straightening out the interactive relationship between finance and real estate, and promoting a virtuous cycle between finance and real estate.
"After weathering many storms, a person does not grow old; having just crossed the pass, the road ahead is still long." At present, during the period of adjustment and transformation of China's real estate industry, it is necessary to promptly push forward the implementation of the work arrangements of the real estate financing coordination mechanism, adopt city-specific, targeted, and systematic policies, ensure the normal construction and delivery of projects, actively and steadily defuse real estate risks, stabilize residents' expectations, boost market confidence, and promote the steady and healthy development of the real estate market.
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