China cuts off another source of money from residential real estate developers: private equity funds.
According to Bloomberg, the government-approved China Asset Management Association has told companies that it will no longer accept registrations to create such funds for real estate investments.
This is the latest step in the government’s efforts to tackle the growing debt in the housing sector and prevent a housing bubble.
Earlier this year, the People’s Bank of China install caps on loans to developers and limited their mortgage lending.
Some of China’s largest real estate developers are swimming in debt – Evergrande Group is the largest in the world debtor developer with liabilities of about $ 300 billion. The company has billions of dollars in bonds maturing in the next year or so, and its share price has plummeted over the past year.
Despite broader concerns about the stability of the sector, builders still find buyers for their bonds. Chinese real estate companies have sold $ 20.3 billion in bonds this year, the second highest since 2017.
Private equity funds are a key source of money for developers in China, and they only began to rely more on private equity dollars after the government limited other sources of funding.
As of last year, investments in private equity funds focused on real estate amounted to about $ 130 billion, or 13.5 percent of the sector as a whole.
[Bloomberg] – Dennis Lynch