Some Chinese cities have relaxed rules for land sales after cash-strapped developers became reluctant to bid, threatening the biggest revenue earner for local governments.

Several large cities including Shanghai and Nanjing have announced details of land sales plans in December, offering more plots than those in the last round, the official Securities Times reported. Some eased transaction requirements for developers, such as by reducing deposits ahead of bidding or refraining from asking for full payment within a month, the newspaper reported.

China’s home slump deepened last month as declines in prices, sales and property investments widened, adding pressure on authorities to stabilize the market. Regulators are fine-tuning their long-running crackdown on the property sector after a credit crunch at China Evergrande Group and other junk-rated developers began spreading to higher-rated peers.

About 27 per cent of land parcels offered by local governments went unsold in September after no developers submitted bids — the highest rate since at least 2018, according to data compiled by China Real Estate Information Corp. In October, land sales by value slumped 24 per cent from September, official data showed.

That may worsen the debt problem at local governments, which rely on land sales for about 40 per cent their revenue, according to E-house China Research and Development Institute.

“Signs of marginal easing is emerging in land sales, alleviating cash flow pressure for property developers,” said Chen Wenjing, associate research director at China Index Academy. Some cities have lowered capital thresholds for bidding to increase land-selling profits, Chen added.

However, the bidding restrictions overall remain tight at the request of the land ministry, Chen added. Most cities will still scrutinize the source of proceeds developers use to purchase land, to make sure they don’t inflate the market by using borrowed funds. – Bloomberg

Source: NewStraitsTimes, Bloomberg/November 19, 2021