Daily Management Review

China May Relax Its "Three Red Lines" About Property Industry Rules: Bloomberg News


China May Relax Its "Three Red Lines" About Property Industry Rules: Bloomberg News
Bloomberg News reported on Friday that China intends to ease borrowing restrictions for property developers in order to support the troubled sector by relaxing the "three red lines" policy.
The "three red lines" policy was announced in August 2020 to address property developers' excessive borrowing by limiting the amount of new debt they can raise each year.
Beijing may allow some real estate firms to increase their leverage by lowering borrowing caps and delaying the grace period for meeting the policy's debt targets. Regulators could also extend the deadline, which was originally set for June 30, by at least six months, according to the report, which cited people familiar with the situation.
According to the new proposal, China will relax debt growth restrictions for developers based on how many red lines they cross, lowering borrowing caps for companies that cross all three thresholds.
Last year, China's property sector, which accounts for a quarter of the economy, took a hit as cash-strapped developers were unable to complete apartment construction, prompting some buyers to boycott mortgages. A number of the country's largest developers have also gone bankrupt and are embroiled in protracted debt restructuring negotiations.
To help the sector, policymakers have announced a slew of measures in recent months, including making it easier for developers to raise new funds, extending loan repayment periods, and providing more assistance to homebuyers.
Analysts anticipate a lengthy and bumpy recovery.
The "three red lines" metric capped debt-to-cash, debt-to-assets, and debt-to-equity ratios and required property developers to provide more debt information.