As China’s real estate companies are highly dependent on the financial system, the debt risks of real estate companies are more likely to be transformed into systemic risks of banking and financial institutions. Therefore, in response to the triple pressure of “new crown epidemic + debt repayment peak + new financing regulations”, the debt risk problems exposed by real estate companies must arouse great attention and make great efforts to prevent and resolve them. On the one hand, relevant regulatory agencies should further supervise and regulate the financing activities of real estate companies based on their financing qualifications and use of funds; on the other hand, real estate companies and related industry associations should also actively face new financing regulations and accelerate the transformation of their development models Together with corporate management reforms, we will jointly realize the steady and healthy development of the real estate market.
(1) Accelerate the promotion of stress testing and grading evaluation systems for real estate enterprises, and improve the risk early warning mechanism for the real estate industry
The new “three red lines” financing regulations are of great significance to the marketization, standardization and transparency of the financing management of real estate enterprises. In the future, on the basis of summarizing the supervision experience of key real estate companies, we can orderly promote the expansion and expansion of the new “three red lines” financing regulations during the three-year transition buffer period, and gradually increase the financing supervision of unlisted real estate companies and non-key real estate companies , Strengthen the penetrating supervision of the off-balance sheet liabilities of real estate companies. In view of the possible local liquidity risks, it is necessary to do a good job of forecasting, investigation and scenario deduction, and speed up the improvement of the classification and evaluation system of real estate enterprises. Resolutely and promptly curb the financing behavior of real estate companies that have excessively extended debts and malicious “borrowing new and repaying the old”; for real estate companies that have defaulted on debts and failed to pay on time when bonds are due, they should be classified and disclosed in breach of contract information, and standardize and restrict them. Follow-up financing behavior. For real estate companies that have stepped on the “three red lines” and whose ultimate stress test results are less than six months old, as well as regions with an average debt-to-asset ratio of over 85%, regulators should pay close attention to their capital trends and potential financial risks that may be triggered.
(2) Using the idea of ”time for space” to promote the implementation of housing enterprises debt replacement extension and poverty relief policies
Fully considering the impact of the epidemic and debt repayment peak factors, for real estate projects with good expected comprehensive benefits and insufficient short-term cash flow, debt replacement or extension can be carried out through the appropriate issuance of replacement bonds, so as to promote the development of real estate enterprises’ debt-to-equity swaps in an orderly manner. During the epidemic period, short-term loans within one year that fail to repay the principal and interest on time can be extended appropriately. Further improve the pre-sale fund supervision policy during the epidemic, appropriately postpone the payment deadlines for certain taxes and land transfer fees for real estate companies, and accelerate the implementation of policies and measures such as corporate rent reduction and exemption and resumption of work. For real estate companies that actively respond to the national investment policy and are committed to urban renewal, rural revitalization, old community reconstruction, shantytown reconstruction, and resolute implementation of the country’s relevant epidemic prevention and control policies, donations, donations, and rent reduction clauses with their tenants , Can provide moderate special tax relief and financing policy support.
(3) Regulate the overseas bond issuance of real estate companies to effectively prevent and control potential external financial risks
In accordance with the “Notice on Improving Market Disciplinary Mechanisms and Strictly Preventing Foreign Debt Risks and Local Debt Risks” issued by the National Development and Reform Commission and the Ministry of Finance, we will pay close attention to the potential derivative risks of overseas debt issuance by real estate companies and strictly control them in the approval process. Strictly regulate the foreign debt filing and registration management system, earnestly and timely report detailed information on the scale, duration, and use of funds to be replaced overseas debts, and strengthen the public information disclosure of foreign debt issuance by real estate companies. In principle, the issuance of foreign debts can only be used to replace medium and long-term foreign debts due within one year, and resolutely eliminate market violations such as excessive issuance of foreign debts by real estate companies and the use of foreign debt funds to repay domestic debts. Actively and steadily select external debt financing tools and financial products, and include overseas debt issuance by overseas subsidiaries of domestic real estate companies in the scope of current external debt statistics in accordance with the national principle. Beware of international speculators and hot money bypassing regulatory violations to flow into the Chinese real estate market through overseas financing channels, thereby triggering Potential volatility in the stock, foreign exchange and housing markets. Encourage real estate companies to redeem foreign dollar debts in advance in accordance with changes in the international financial market during the epidemic, effectively preventing the risk of rising foreign debt costs caused by exchange rate fluctuations.
(4) Encourage the expansion of the proportion of direct financing and promote the optimization and transformation of the financing structure of real estate enterprises
Real estate companies raise equity financing by issuing additional stocks, introducing equity investment, spin-off and listing, etc., which can increase minority shareholders’ equity and monetary capital in their statements, which is conducive to improving the “three red lines” indicators. In the context of the current new financing regulations for real estate companies, real estate companies can be appropriately guided to create new financing channels, and real estate companies can be forced to accelerate the transformation of their financing structure. Realize effective risk diversification through the diversification of real estate financing channels to solve the current problem of excessive dependence on bank credit funds. For this reason, it is necessary to further encourage the expansion of the proportion of direct financing of real estate enterprises, accelerate the asset securitization of real estate enterprises, and effectively promote the capital market, especially the stock market, to enter a standardized track. Gradually restore the stock market’s normal financing function for real estate companies, and orderly relax the corresponding policy control, especially for real estate companies’ IPOs. It is also possible to actively expand diversified financing models such as real estate trusts, bonds, funds, and real estate trust investment funds (REITs), increase industry chain financing, gradually increase the asset liquidity of real estate companies, and effectively prevent and resolve debt risks of real estate companies.
(5) Comply with the rising trend of industry concentration and accelerate the transformation of the development model of real estate enterprises
Since the reform of China’s real estate marketization in 1998, the number of real estate development companies has begun to increase rapidly, and it has gradually stabilized after 2013. In 2019, the number of real estate development companies will remain around 99,544, and the rapid expansion of the industry will no longer continue. No matter how the market environment changes in the past ten years, the market concentration of real estate sales and sales area has always maintained a relatively stable high growth rate. The continuous increase in the concentration of the real estate industry, the continuous decline in average profit margins, as well as the narrowing of financing channels and the increase in financing costs, have further increased the capital chain risks of real estate enterprises. The increase in risks has also exacerbated the financing difficulties of real estate enterprises. It has fallen into a vicious circle that is difficult to escape. It can be said that for real estate development companies under the triple pressure of “new crown epidemic + debt repayment peak + new financing regulations”, the upward trend of industry concentration will be inevitable.
To this end, it is necessary to completely change the traditional development model of real estate companies that “emphasize development and neglect ownership” and “emphasize expansion and neglect quality”, actively expand the real estate agent construction business, vigorously promote the diversified operation model of real estate enterprises, and transform and develop characteristic products or upgrades. Downstream services, realize the diversification of product markets and the diversified transformation of cross-regional industries, thereby effectively diversifying operating risks and increasing sustainable profitability. In order to comply with the trend of increasing concentration in the real estate industry, appropriate consideration can be given to epidemic factors and actual conditions, and real estate enterprise M&A loans should be listed separately from real estate development loans, not included in the strict supervision of banks and financial institutions, and effective by improving the quality of real estate enterprise M&A and restructuring Resolve debt risks in the real estate industry.
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