Shenzhen has relaxed the conditions for taking part in land sales, one of the first among China’s local authorities to backtrack from the draconian measures that have sent the entire country’s real estate industry into a tailspin. According to the new rules laid out by the Planning and Natural Resources Bureau of China’s technology metropolis, more than one developer will be allowed to bid for land at the same price, where the competition will be based on how many homes they can build under the “affordable” price category. The bureau put 11 plots on the market last week, the third land sale this year. The relaxation followed a disastrous round of land sales when 206 land parcels were withdrawn from auctions around the country since September, as the central bank’s tight caps on loans backfired and drove cash-starved and risk-averse developers to the sidelines. The tepid uptake was also the market’s response to the government’s move to centralise land sales across 22 large cities into three annual auctions. “It is good for developers’ cash flow as they can sell affordable homes while public rental homes are only for collecting rent,” said Yan Yuejin, director of E-house China Research and Development Institute. “The change is to lure more developers to purchase lands. Many of them struggled with their liquidity and chose to sit aside last time, and we saw many land withdrawn in the second round of land auctions.” The withdrawal of land sales represented about a third of the 700 parcels offered across 22 cities including Beijing, Shanghai, Guangzhou and Shenzhen . Land sales are major sources of receipt for local authorities, which earn up to 80 per cent of their fiscal income from renting out the right to use state property for building private homes. Developers have been on edge ever since China stepped up its scrutiny of highly leveraged builders with the central bank’s so-called three red lines of loan caps in August 2020. That stopped the heaviest borrowers from taking on more debt, pushing the likes of China Evergrande Group – with more than US$300 billion in liabilities – into deep financial quagmires as they struggled to generate cash to pay their debt. The crisis is poised to spiral out of control, driving Evergrande, Sichuan Languang Development, Fantasia Holdings and Modern Land (China) to either miss or default on bond payments. “More cities will see such loosening up as developers were less willing to pour big bucks into buying land while they are under deleveraging campaign,” said Yang Kan, a property analyst with Ping An Securities. The recent failures are in stark contrast to the first round of auction, when several cities were forced to stop or postpone them as buoyant demand kept prices elevated, defeating the auction system that was designed to tame land prices. Shenzhen is not the only local government to be relaxing the land sale rules. The Jiangsu provincial capital of Nanjing, and its premier city Suzhou, have also lowered the threshold for developers to participate in the land sale last week. Suzhou’s planning bureau said that the deposit for bidding on each plot in the third round of land auctions will be lowered to 30 per cent of the reserve price, from 50 per cent in the previous round. “Only such an optimised arrangement can ease the pressure on developers and boost their willingness to participate in land auctions to stabilise the land market,” said Yang.