Local property developers are worrying about whether the housing market will be affected by the banks' austerity policy.

A researcher from the People's Bank of China Shanghai Branch said local commercial banks will now be more careful when granting loans to private real estate developers.

The city now has more than 2,000 property development companies, including a considerable proportion of private firms that have a small amount of funds.

The city government has issued regulations insisting real estate developers pay off the whole purchase price before gaining control of the land. The previous situation was significantly more flexible.

"If banks hold up or reduce loans to property developers, the city's real estate market will have problems," said Wang Zixiang, chairman of the Shanghai Typical Residence Service Company.

Wang told yesterday's forum on the current prospects for Shanghai's real estate market that many developers are heavily reliant on bank loans for their property projects.

The People's Bank of China statistics show the nation's property loans totalled 1,836 billion yuan (US$222 billion) by April this year, accounting for 17.6 per cent of commercial banks' combined loans.

A Shanghai-based researcher, who wished to remain anonymous, told China Daily in a phone interview that at least one-third of the funds spent on local real estate projects are bank loans.

Another one-third, he said, are their own funds and the third part comes from house buyers mortgage loans.

"Given the suspension of loans, the developers, which are not strong enough in funds, will be heavily hit," Wang said.

He added that some projects are likely to be stopped halfway and some finished apartment buildings will have to be sold at reduced prices.

"But at present, we feel it difficult to estimate how much the effect will be to the city's real estate market," Wang said.

The city sold new housing of 20 million square metres and second-hand apartments of 20 million square metres last year, leaving 1.34 million square metres of empty housing.

Of the sold apartments, some were purchased by house buyers as a means of investment.

The city government is building 3 million square metres of low-priced apartments for low-income families as an effort to curb the rise of housing prices, Wang said.

Participants at the forum believed the city's housing market should continue to focus on average people.

(China Daily 06/24/2003 page5)

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