Real estate industry to welcome policy support. On November 14, the CBRC, the Ministry of Housing and Urban-Rural Development, and the People's Bank of China jointly issued the Notice on the Work of commercial Banks issuing letters of Guarantee to replace pre-sale regulatory funds (hereinafter referred to as the Notice), guiding commercial banks to issue letters of guarantee to replace pre-sale regulatory funds to high-quality real estate enterprises in accordance with the principles of marketization and rule of law.

"Notice" pointed out that after the funds in the regulatory account reach the regulatory limit stipulated by the housing department, real estate enterprises can apply to commercial banks to issue a letter of guarantee to replace the funds in the regulatory limit. Commercial banks can make independent decisions according to the principles of marketization and rule of law, and on the basis of fully evaluating the credit risk, financial status and reputation risk of real estate enterprises, and carry out the pre-sale supervision funds business of replacing letters of guarantee with high-quality real estate enterprises.

Surveyed experts generally believe that the current lack of confidence in the real estate market, the "Notice" is mainly to support high-quality real estate enterprises reasonable use of pre-sale regulatory funds, prevent and resolve the liquidity risk of real estate enterprises, and promote the stable and healthy development of the real estate market.

Dong Ximiao, chief researcher of Zhailian Finance, said that the current real estate market is still weak, commercial housing sales have declined significantly, and the liquidity of some housing enterprises is relatively tight. The relevant departments explored the introduction of bank guarantee to replace pre-sale supervision funds, which will help optimize the management of pre-sale supervision funds and help housing enterprises ease liquidity pressure more flexibly.

Draw a red line of 30% of the replacement amount

The "Notice" clearly stipulates the amount and period of the letter of guarantee. The "Notice" pointed out that the letter of guarantee can only be used to replace the funds within the regulatory limit of the pre-sale fund supervision account established in accordance with the law and compliance. The amount of replacement shall not exceed 30% of the amount of funds required to ensure the completion and delivery of the project in the supervisory account, and the amount of supervision funds after replacement shall not be less than 70% of the amount of funds required to ensure the completion and delivery of the project in the supervisory account.

In this regard, Li Yujia, chief researcher of the Housing Policy Research Center of the Guangdong Provincial Urban Planning Institute, said that the red line of delimit 30% of the replacement amount can reasonably release the pre-sale supervision funds, which can be used to support the liquidity of housing enterprises, play the purpose of capital circulation, and ensure the rights and interests of existing creditors and dispel market concerns.

"The replacement of pre-sale regulatory funds plus special loans, rescue funds and supporting financing will help housing enterprises revitalize unsold and even undeveloped projects and achieve the effect of four or two." Li Yujia said.

Yan Yuejin, research director of the think tank center of the E-House Research Institute, believes that according to the general relationship between the completion of the project and the housing sales, it is expected that the funds that can be replaced this time account for about 10% of the scale of housing sales, which has a more obvious role in improving the liquidity of housing enterprises.

In addition, the "Notice" also requires that when the funds within the regulatory limit are allocated for use, the amount of the guarantee is lowered accordingly to ensure that the funds in the regulatory account are always not less than 70% of the funds required for the completion and delivery of the project. If the real estate enterprise does not make up the difference funds in the supervision account, the amount of the guarantee shall not be adjusted. In addition, commercial banks are required to reasonably determine the guarantee period to ensure that it matches the project construction cycle.

"This policy makes the supervision of pre-sale funds more flexible. According to the "Notice", the letter of guarantee can replace the funds in the supervision account, but there are limits on the amount; The retained funds need to basically ensure that the project can be completed and delivered; The remaining funds are insufficient and should be paid in advance by the sending bank at once." Middle Finger Institute index division market research director Chen Wenjing told the Financial Times reporter.

Specify the purpose of the replacement funds

The "Notice" clearly states that real estate enterprises should use the pre-sale supervision funds replaced by the guarantee letter in accordance with the provisions, and give priority to the project construction, repayment of project debts, etc., and shall not be used for the purchase of land, new other investments, and repayment of shareholder loans. Real estate enterprises should undertake the obligation of replenishment of funds in the supervision account according to the agreement to ensure sufficient funds for project construction.

Yan Yuejin believes that the "Notice" has a certain breakthrough for the use of bank guarantee replacement pre-sale regulatory funds. In the past, the operation of replacing pre-sale funds with bank guarantees was more clearly used for project construction, and this time, a new use was added, that is, to repay the maturing debt of the project, which helps housing enterprises resolve debt risks.

However, not all real estate development enterprises are applicable to this policy. The "Notice" clearly states that when commercial banks issue letters of guarantee to replace pre-sale regulatory funds, they should refer to development loan credit standards, fully evaluate the credit risk, financial status, reputation risk, project sales prospects and residual value of real estate enterprises, and carry out the business of guarantee replacement pre-sale regulatory funds with high-quality real estate enterprises with stable operations and good financial status. For projects where the relationship between creditor's rights and debts is complicated, there are many disputes involved in litigation, the amount of external guarantee is too large, and the construction progress is obviously lower than expected, the guarantee letter should be prudently issued. If there is a relationship between the project subject and the general contractor, the project risk should be fully assessed.

At the same time, commercial banks should also meet the requirements of issuing a guarantee to replace pre-sale regulatory funds. The notice stipulates that commercial banks with a regulatory rating of 4 or below or assets of less than 500 billion yuan shall not carry out the business of replacing pre-sale regulatory funds with letters of guarantee. Commercial banks shall not issue a guarantee letter to real estate enterprises as the main shareholders, controlling shareholders or related parties of the bank to replace pre-sale supervision funds. Non-bank financial institutions such as enterprise group finance companies shall not issue letters of guarantee to replace pre-sale supervision funds.

Chen Wenjing said that on the one hand, the "Notice" clarified the scope of qualified real estate development enterprises, and on the other hand, it also put forward conditional restrictions on the qualifications of commercial banks. This will not only help improve the efficiency of pre-sale funds used by high-quality housing enterprises, but also help commercial banks effectively prevent business risks.

In addition, in order to prevent risks, the "Notice" also stipulates that the full amount of the letter of guarantee is included in the unified credit line for real estate enterprises and their affiliated groups. It is necessary to prevent the risks of the letter of guarantee business through deposit, real estate enterprise counter-guarantee and other credit enhancement measures, and set aside risk capital as required and draw risk reserves. In the event of advance payment, the issuing bank shall promptly take recourse measures to the real estate enterprise to preserve the security of creditor's rights. Advance funds shall be fully allocated, truly classified, and risks shall not be hidden.

In fact, in order to optimize the supervision of pre-sale funds, various places have already taken action. Chen Wenjing said that in the face of the liquidity problems of some housing enterprises, many provinces and cities across the country have adjusted the regulatory policy of pre-sale funds this year, or relaxed regulation to provide some financial support, or tightened policies to ensure the safety of project construction funds.

In recent days, there has been good news about bailing out real estate companies. On November 8, the China Interbank Market Dealers Association said that under the support and guidance of the People's Bank of China, it will continue to promote and expand the private enterprise bond financing support tool (the "second arrow") to support private enterprises, including real estate enterprises, to issue debt financing. It is expected to support about 250 billion yuan of private enterprise bond financing, and the subsequent expansion can be further expanded depending on the situation. On November 10, the dealers Association issued a news that it accepted Longfor Group's 20 billion yuan storage type registration and issuance, and China Bond Enhancement Company simultaneously accepted the business intention of enterprise credit enhancement.

"To achieve the stability of the building and the industry, both sides of supply and demand should work simultaneously, support each other, and stabilize expectations, and the recent policies have released positive signals on both sides of supply and demand." Li Yujia said.

Chen Wenjing said that after the introduction of this policy, it is expected that all places will accelerate the implementation of the landing and release more capital liquidity for high-quality housing enterprises. Combined with a number of previous policies, confidence in the real estate market is expected to be further boosted, and the superposition of policies can also better play the "combination" effect. The next step remains focused on stabilizing sales in the market.