Lending requirements are tightened for both developers and home buyers The mainland's banking regulator has released new rules on property loans in the latest effort to rein in the runaway real estate industry. The guidelines, issued by the China Banking Regulatory Commission, are intended to help banks improve their risk management capabilities by tightening lending requirements for both developers and home buyers. Land and property developers will have to put down 35 per cent, up from 30 per cent, of the total cost of a project before seeking a loan. For buyers, their monthly mortgage repayments should not exceed half their income. And their total debt repayments should be capped at 55 per cent of their monthly earnings. The regulations also tighten the application process for both commercial and individual mortgages. Property developers will have to go through credit history checks by a third party and will be required to hand in their financial statements for the past three years when borrowing from banks. Home buyers will have to reveal their entire financial history to convince banks they are capable of repaying the loans. The rules would take effect immediately and applied to commercial banks, joint stock banks, rural credit co-operatives, policy banks and foreign banks, the commission said. 'Property developers rely heavily on bank loans,' a commission official said. 'If the market goes down, banks' non-performing assets will balloon.' He said commercial banks on the mainland lacked ability and experience in dealing with property loan risks. Commission regulators fell short of slapping a ceiling on the ratio of property loans to the rest of lending for banks, although a level of 30 per cent had been proposed, according to the official. 'We decided it's better to let every bank make its own decision concerning this matter,' he said. Commission officials said the rules would help banks to better recognise, assess, monitor and control risks in making loans to the property industry. Outstanding bank loans to developers surged at an annual rate of 25.3 per cent between 1998 and 2002, while outstanding loans to individual consumers had shot up 113 per cent year-on-year between 1997 to 2002, the commission said.