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China's leading real estate developers, facing stricter mortgage regulations, are trying to mount a counter-attack against the central bank's housing-loan policy. "Any new policy aimed at regulating the real estate market must be implemented with caution, otherwise it will cause severe market fluctuations," said Ren Zhiqiang, chairman of real estate conglomerate Beijing Huayuan Group. "Fluctuations would seriously harm the real estate sector." Ren made his remarks late last month during a meeting sponsored by China Housing Industry Association. Ren is the chairman of Beijing Huayuan Real Estate Development Co Ltd. The association is drafting a report outlining its views, and the potential risks it believes could result if the policy is implemented. The report will be sent to the State Council, China's cabinet, for decision-makers' consideration. It will ask China's leaders to reconsider the policy. The People's Bank of China (PBOC) released details of the policy on June 13. The policy is aimed at controlling risks involved with real estate development loans. "The central bank's policy released last month is expected to change the current uneven house supply situation, and ensure the healthy development of China's housing market," said Qin Hong, deputy director with the Policy Research Centre under the Ministry of Construction. Under the new policy, beneficial interest rates on mortgages for common commercial housing will remain, while interest rates on loans for luxury apartments, office buildings and villas will increase in accordance with the central bank's annual loan-interest-rate guide. People purchasing a second or subsequent house will be required to pay a higher downpayment. The current minimum downpayment - 20 per cent - for a first home will remain. Central bank official Huang Mudong said the bank's intervention will directly curb the surge in real-estate-related loans and deal with overheating markets in some cities. "It will also serve to strengthen a banking sector that now finds itself with no choice but to improve the quality of its lending and reduce its exposure to bad debts." Huang added. Some real estate developers, concerned about the possible effects of the policy, are hastily selling their properties. Soho China, the nation's leading real estate developer, late last month began selling space in the fourth phase of its Jianwai Soho luxury residential and commercial development. The project - the fourth phase involves approximately 100,000 square metres of living and office space - is being constructed in Beijing's central business district. The developer has sold most of the 230,000 square metres of residential and shopping properties in the project's first three phases. Investors reportedly purchased those properties to avoid being affected by the tighter mortgage rules. Soho China Chairman Pan Shiyi said the new mortgage policy will have little effect on the project's fourth phase, as construction is already completed. Central bank officials contend the policy's purpose is to control loan risks, not to affect development.
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