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China gives property firms easier access to escrow funds: Report

China gives property firms easier access to escrow funds: Report

A view shows cranes in front of the skyline of the Central Business District (CBD) in Beijing, China, on Oct 18, 2021. (Photo: REUTERS/Thomas Peter)

HONG KONG: China has moved to give real estate firms easier access to presale proceeds from residential projects, local media outlet Cailianshe said on Thursday (Feb 10), as authorities seek to loosen a stifling liquidity squeeze in the property sector.

Chinese developers are allowed to sell projects before completing them but are required to put such proceeds into escrow accounts. Cash held in escrow typically equates to 50 per cent to 70 per cent of developers' presale funds.

In 2021, amid fears of sector-wide contagion from bluechip China Evergrande Group's debt problems, many local governments curbed withdrawals from escrow accounts, leaving some projects unfinished and developers short of cash.

Cailianshe, a financial news website, said on Thursday that a new regulatory framework - which Reuters first reported on Jan 19 that China was drafting would "correct over-tightening" of escrow accounts by city or county-level authorities.

Curbs on withdrawals would use different calculation methods based on construction costs, allowing developers to withdraw more funds than previously, Cailianshe said.

A bloated real estate sector has undergone a deleveraging crisis in the wake of Evergrande's near-meltdown. Once China's top-selling developer, it is now the world's most indebted property firm with liabilities of around US$300 billion.

Source: Reuters/ng

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