Without increasing the hidden debt of local governments, how to correctly understand the new policy of affordable housing refinancing?

On May 17, the central bank announced the establishment of affordable housing re-lending to support local governments to purchase completed and unsold commercial housing at a reasonable price for affordable housing. As soon as the policy came out, it aroused great concern in the market.

The scale of affordable housing refinancing is 300 billion yuan, with an interest rate of 1.75%, a term of 1 year, and a period of 4 extensions. The recipients include 21 national banks, including the China Development Bank, policy banks, state-owned commercial banks, postal savings banks, and joint-stock commercial banks. Banks issue loans in accordance with the principle of independent decision-making and assumption of risk. The People's Bank of China (PBoC) will issue re-loans at 60% of the loan principal, which can drive bank loans of 500 billion yuan.

Tao Ling, deputy governor of the central bank, introduced at the regular policy briefing of the State Council on the same day that the operation of affordable housing relending is consistent with the existing structural monetary policy tools. Based on the application of local state-owned enterprises and in accordance with the principle of bearing their own risks, financial institutions shall independently decide on the conditions for granting loans and whether to issue loans; After the bank has a qualified loan, it will apply to the People's Bank of China for a reloan.

Do not increase the hidden debt of local governments

The affordable housing refinancing tool adheres to the principle of marketization and rule of law, and the decision-making of all parties involved is independent and rational.

According to industry insiders, the trading decisions between different market entities involved in the tool follow the principles of equal consultation, autonomy and voluntariness, and all links will be reflected. Local governments can decide whether to participate or not based on the actual situation of the local real estate market. The protection group can voluntarily choose whether to participate in the placement or lease. The local state-owned enterprises selected by the local government are the acquisition entities and have the right to decide whether to purchase the real estate of the acquired real estate enterprises. The acquired real estate company can decide whether to sell the property or not. Banks can make their own decisions on whether to extend loans to the acquirer. The transaction price is also negotiated on an equal footing by all parties involved.

Local state-owned enterprises and financial institutions shall bear the risks of refinancing affordable housing. According to Tao Ling, the operation of affordable housing refinancing is consistent with the existing structural monetary policy tools. Based on the application of local state-owned enterprises and in accordance with the principle of bearing their own risks, financial institutions shall independently decide on the conditions for granting loans and whether to issue loans; After the bank has a qualified loan, it will apply to the People's Bank of China for a reloan.

It is worth noting that the refinancing of affordable housing does not increase the hidden debt of local governments. The policy adjustment clearly requires that local state-owned enterprises are selected by the city government, and the selected local state-owned enterprises and their affiliated groups are not allowed to be government financing platforms, and the acquisition funds are recovered through leasing operating income and future housing sales income.

In 2023, the People's Bank of China (PBoC) will set up a rental housing loan support program to support eight cities, including Jinan and Zhengzhou, to pilot market-oriented bulk purchase of housing stock and expand the supply of rental housing. Over the past year, the pilot project has been implemented in various cities in an orderly manner, and a commercial sustainable rental business model has taken shape, which has played a positive role in digesting the housing stock in the pilot cities.

"Taking into account the policy convergence as a whole, the rental housing loan support plan will be integrated into the management of affordable housing refinancing as a whole and comprehensively promoted nationwide." Tao Ling said.

Tao Ling said that the policy is conducive to achieving multiple goals through a market-oriented approach. The first is to speed up the destocking of existing commercial housing. Local state-owned enterprises, with the support of banks, participate in the acquisition of completed and unsold commercial houses in a market-oriented manner, which can quickly form group purchasing power and promote the destocking of the commercial housing market. The second is to speed up the supply of affordable housing. The acquired commercial housing is used as affordable housing for sale or rent, which can quickly revitalize the stock resources and better meet the housing needs of wage and salary groups. The third is to help ensure the delivery of buildings and the "white list" mechanism. After the real estate enterprise sells the completed commercial housing, the returned funds can be used for the continuation of the project under construction and improve the financial situation of the real estate enterprise.

Revitalize existing assets

The highlight of this round of policies is to revitalize the stock. Revitalizing the stock can not only boost the confidence of home buyers, but also the key to resolving real estate risks.

On April 30, the meeting of the Political Bureau of the Central Committee proposed for the first time that it is necessary to study the policy measures to digest the stock of real estate and optimize the incremental housing.

The first financial reporter learned that state-owned enterprises in Zhengzhou, Nanjing, Zhuhai and other places have taken the lead in participating in the process of destocking housing through direct acquisition, trade-in, etc., and preliminary statistics show that more than 10,000 units of housing have been announced by various cities.

Market authoritative experts told the first financial reporter that the central bank set up a special re-lending tool in a timely manner to support local state-owned enterprises to acquire stock real estate for affordable housing, reflecting the implementation of the Party Central Committee's decision and the support of local governments to take the initiative to resolve the risk of stock housing.

Support the construction of a new model of real estate development, and form a synergy with the construction of the "three major projects". Previously, some experts suggested that increasing the supply of affordable housing is the general direction, and in the context of changes in the supply and demand of real estate, it is possible to win more than one stone by acquiring the stock of housing for affordable use.

On the one hand, it is conducive to accelerating the "destocking" of the commercial housing market. Guiding local state-owned enterprises to participate in the acquisition in a market-oriented manner with the support of financial institutions can quickly form group purchasing power and accelerate the speed of destocking commercial housing. For the current real estate inventory of large and long de-capitalization cycle of the city, it will undoubtedly play a certain supporting role.

On the other hand, it is conducive to accelerating the supply of affordable housing market. By revitalizing the stock, it will help alleviate the structural contradiction of the current real estate market with more supply of commercial housing and less supply of affordable housing, and better solve the housing difficulties of wage and salary groups.

For the majority of home buyers, whether they can deliver the house on time is undoubtedly the most concerned thing.

In the early stage, the financial management department has introduced policies such as special loans for guaranteed delivery of buildings and urban real estate financing coordination mechanism (i.e., "white list" mechanism), which have effectively alleviated the financing difficulties of real estate projects.

According to the analysis of market experts, the People's Bank of China's newly established affordable housing refinancing will form a synergy with the guaranteed delivery of buildings and the "white list" mechanism. After the real estate enterprise sells the commercial house, the returned funds can be used for the continuation of the project under construction, earnestly fulfill the statutory responsibility of ensuring the delivery of the building, and safeguard the legitimate rights and interests of the buyers. After the ability of real estate enterprises to withdraw funds is enhanced, it is also conducive to more of their projects to meet the "white list" conditions, forming a virtuous circle and boosting the confidence of home buyers.

On the books of real estate companies, there is land and real estate for sale, and on the other hand, debt. In order to repay debts and resolve risks, in addition to coordinating financing support from various channels as much as possible, it is mainly necessary to sell real estate and land and revitalize the stock of assets into debts.

The above-mentioned market authoritative experts told Yicai that in the past, most of the debts corresponding to land and real estate of real estate companies would eventually be transferred to residents with commercial housing transactions, but in the case of a downturn in the real estate market, the original "land acquisition and demolition households→ local governments→ real estate enterprises → residents" real estate and capital circulation has been broken, and it is difficult for houses to be sold to residents as originally planned, and real estate companies and local governments are facing the problem of inventory backlog. With the support of the new tools, local state-owned enterprises can become new buyers of houses in the market, opening up the market cycle.

Other market experts suggest that in the longer term, assets such as land can be used as the object of asset revitalization in the future.

(This article is from Yicai)