Banks press Chinese mainland developers to speed property sales

Banks have reportedly asked highly leveraged mainland developers to speed up property sales, in a tougher refinancing environment.

Alan Chiang Sheung-lai, head of residential property at DTZ on the mainland, said banks had been tightening lending to developers for the past two years and had shifted preference to short-term property loans in order to reduce risks.

"Lenders are demanding developers sell homes faster or directly transfer part of the sale proceeds for debt repayment while negotiating for refinancing," Chiang said

He said he believed mainland lenders might demand more from small developers as the latter tended to be less flexible in pricing strategy and faced higher risks.

The China Banking Regulatory Commission (CBRC) has told lenders they should also demand more collateral or tell developers to sell projects or stakes if the banks believed the developers could face difficulties repaying loans due within a year, Bloomberg has reported, quoting a person with knowledge of the matter.

Mortgages and loans to developers classified as "special mention", or those at risk of souring, had started to rise recently, the source said.

Lack of funding, high leverage and a growing pile of loans about to mature had increased the risk that some developers' financing lines might collapse, the CBRC told lenders, according to the source.