Refinancing, M&As to resume after 12-yr suspension, spur troubled industry

China's real estate enterprises on Monday received the green light to resume refinancing and mergers and acquisitions after a 12-year suspension by the top securities regulator, which may comprehensively and rapidly improve the financing situation of property enterprises, industry experts said on Tuesday.

In a statement on its website on Monday, the China Securities Regulatory Commission announced a slew of measures to adjust and optimize equity financing for property enterprises.

The stable and healthy development of the property market, the CSRC said, is critical for the stability of the financial market as well as the overall economy and society.

"This is the last leg of the three methodologies, also known as 'three arrows', which aim to assist property developers with sufficient financing solutions to ensure the stable development of the sector," said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.

Yan said that in a bid to solve the financing difficulties of privately owned property developers, People's Bank of China, the central bank, and certain government divisions concerned have designed a package of policies to expand financing channels to bond, credit and equity markets.

"The CSRC's move to support the refinancing of property companies, in combination with previous loosening measures by financial regulators to support credit expansion and bond financing, is expected to create a friendlier environment and better opportunities for property developers' refinancing," Yan said.

An analyst with Yicai Media Group recalled that in October 2010, listed property developers' refinancing was suspended by the CSRC, in response to State Council's notice released earlier that year requiring to halt real estate developers' listing, refinancing and restructuring of major assets.

Recent relaxations on credit expansion and bond financing, and the speech by CSRC Chairman Yi Huiman to the Annual Conference of Financial Street Forum 2022 last week, have created expectations that the current restrictions on equity financing will also be eased next, said Li Yujia, chief researcher at the provincial residential policy research center of Guangdong.

"For the moment, the difficulties and challenges confronting the real estate industry are still there, and more support needs to be given to prime property developers, in terms of improving their balance sheets, aiding their reasonable bond issuances and financing demand, and facilitating mergers and acquisitions in the industry," said Yi.

The CSRC's five measures are aimed at tackling issues like the property sector's mounting capital pressure, and this will help boost industry confidence and stimulate the market, said Wang Xiaoqiang, chief analyst with the Zhuge Real Estate Data Research Center.

Capital has always been the lifeblood of property developers — and solid performance of property developers, especially those owned privately, is key to boosting market confidence, Wang said.

The latest policies that took immediate effect on Monday include green light for mergers and acquisitions, resumption of refinancing, optimization of Hong Kong-listed property developers' refinancing policies, promotion of issuance of real estate investment trusts or REITs, and the establishment of private equity funds.

Yan said the refinancing policies will better facilitate existing financing, optimizing companies' financing structure. "The opportunities for real estate enterprises' broad and swift improvement in their capital condition are now available, and property enterprises should seize them and make the best possible use of them for their own development."