Developer condemns lending restrictions
Government should let market decide, says chairman of property company
One of the country's top private property developers has slammed a new People's Bank of China lending policy that tightens the rein on the real estate market. Officials issued the policy without adequate public consultation, says Pan Shiyi.
Mr Pan, chairman of Beijing-based Soho China Ltd, said the policy - introduced early last month shortly after the chairman of Shanghai Land, Chau Ching-ngai, was detained in Shanghai - 'was issued in haste and will 100 per cent impact' the real estate market on the mainland.
The policy restricts lending to developers and attempts to regulate the messy and often corrupt relationship between banks and developers. Mr Pan said he supports in principle the policy of regulating banking lending but finds fault with two aspects that limit lending to those consumers who buy 'finished' residential or commercial properties.
Short of funds and hindered by a state banking sector that still gives preferential treatment to state-owned enterprises, most private developers pre-sell properties well before they are completed. Many rely on buyers putting up a 30 per cent down-payment on yet-to-be completed properties, with banks lending the remaining 70 per cent as part of the financing process.
'Most private developers in China are not listed companies,' Mr Pan said.
Though more than a dozen property developers have listed on mainland markets, they are all state-owned, since regulators still give state-owned firms preferential treatment.
'However, I believe this policy - if implemented soon - will do dramatic harm to the real estate market in China,' Mr Pan said. 'The government wants to crack down on what they believe is a bubble, but this is debatable. Rather than issuing an order by fiat, the government should let the market decide if such lending is right or wrong.'
Officials in the past year have openly tried to talk down the sizzling real estate markets. Last September, Zhu Rongji said he saw a 'bubble' in the making in the property market.
'I don't believe there is an oversupply at this time,' said Mr Pan.
'Cities like Paris, London or New York went through massive construction a century earlier, while Beijing is just starting to develop. Beijing is like late 19th-century New York or 1970s Hong Kong.
'This new policy, though well intentioned, needs to be adjusted.'
Mr Pan said he had conveyed his criticism to bank officials but is not optimistic they will listen. 'The government clearly didn't consult the market before issuing this policy,' he said.
Foreign banks were taking away market share from domestic lenders, he said. Bank officials were unavailable for comment yesterday.
