Real estate financing under financial regulation and real estate control

Various regulators have implemented the most stringent financial regulatory policies in recent years to prevent systemic financial risks. Controls in the real-estate market are also escalating gradually. The RE industry involves the most numerous financial products. It is highly dependent on finance to the extent that it can even be said it is of the essence. However, the current financial regulatory policies and RE control situation are simply “double kill” to enterprises involved in the sector.

Various regulators have put in lots of work into financial regulation. Enterprises in the sector face all-round containment on financing. “Financing difficulties” and “cash shortage” are predicaments that such enterprises have been confronting in recent years, mainly due to comprehensive containment from the regulators. The National Development and Reform Commission suspended RE enterprises’ issuance of corporate bonds to finance commercial projects. The China Banking Regulatory Commission issued several documents to rectify the chaos in the banking and trust industries. Also, it severely punished many banks and trust institutions for violating regulations related to “transfusing blood” to RE enterprises.

The Asset Management Association of China suspended registration and filing of private equity funds for lending activities. It also refused to accept from PE asset-management plans, which securities and futures operating institutions set up, registration and filing of ordinary residential projects in 16 “hot” cities. Moreover, China Insurance Regulatory Commission further rectified the misuse of insurance funds.

Wang Jihong is a partner and Tang Hongwei is an associate at Zhong Lun Law Firm