Bonds to fund home projects

China will grant approvals to local government financing vehicles as well as some other qualified companies to issue corporate bonds to fund construction of affordable houses.

The National Development and Reform Commission, China's top planning body, has recently issued a notice to local governments across the country, the Shanghai Securities Journal reported Tuesday. It gave the green light to fund-raising initiatives by local financing vehicles aimed at accelerating the development of affordable housing projects.

"With the latest effort by the central government, the country's affordable housing programs are expected to be conducted at a much faster pace in the future as insufficient capital has held things back in the past few years," said Sky Xue, an analyst with China Real Estate Information Corporation. "These endeavors will also play a positive role in the long-term sustainable development of the real estate industry, which always requires a lot of capital."

According to the state notice, corporate bonds, which are usually issued at low interest rates over a long period of time, will serve as a good fund-raising vehicle for affordable housing projects. Proceeds from bond sales should first be used to support affordable housing programs. Corporate bonds for other purposes will only be allowed after affordable home programs have received sufficient capital.

China has made affordable housing a national priority to slow rising home prices.

Under a government blueprint, China is set to build 10 million affordable homes this year and next, with another 16 million going up in the three years to the end of 2015.

For this year, construction of the 10 million affordable homes should begin at the latest by the end of October, the Ministry of Housing and Urban-Rural Development said earlier. As of May, construction had begun on only 30 percent of the projects, public data showed.