China allows qualified property developers to withdraw pre-sale funds

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Residential buildings in Kunming, Yunnan Province, China, October 19, 2022. /CFP

China will support qualified property developers' "appropriate use" of pre-sale funds, according to an official circular released Monday.

Commercial banks will grant property developers letters of guarantee, allowing them to withdraw money from their pre-sale accounts, according to the circular jointly issued by the China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development, and the People's Bank of China.

After being assessed, developers that meet standards regarding credit risks, financial conditions and reputation will be eligible to receive letters of guarantee, it said.

A developer will be allowed to withdraw as much as 30 percent of the pre-sale funds saved for a property project.

The circular added that the withdrawn funds should be used for project construction and debt repayment before anything else. They must not be used to purchase land, make new investments or repay money borrowed from shareholders.

At a meeting in July, the Chinese leadership reiterated the principle that "housing is for living in, not for speculation," stressed the need to make effective use of the policy toolkit by adopting city-specific policies, and underlined the importance of supporting people's needs for essential and better housing.

Source(s): Xinhua News Agency