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China Construction Bank has launched a pilot scheme in Guangdong where it lends renters to pay for their leases over the long term. Photo: Reuters

China’s CCB makes residential leasing sector its new battlefield

The mainland’s biggest home loan lender says apart from providing renters with funds to pay rent, it will tap on ancillary businesses for growth

A few months after its foray into the country’s underdeveloped residential leasing market, China Construction Bank Corp said it would also offer a host of ancillary businesses to allay investors’ fear of unprofitability in the sector.

Wang Zuji, president of China’s largest lender of housing mortgages, told concerned investors that it would not invest too much real money into the sector, but would introduce a set of related financial services that offered “technical expertise”.

based on that.

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“We have extended loans that help tenants to pay rent, but the largest input is not credit, but a portfolio of services throughout the industry chain,” said Wang in an annual result briefing when asked by investors how much the bank would commit into the sector. 

Without directly addressing the question, Wang said “residential leasing is the new priority of CCB this year, and in the future we’ll do more businesses that hinge on the leasing rights”.

CCB launched a “leasing rights” business in January, where landlords are allowed to sell these rights for a fixed period, in most cases for five years, to the bank for a one-off rental payment. CCB then rents out the properties through its in-house or partner agencies to individual tenants. In the future, the lender could package and securitise the rights as assets to be sold to investors.

The central government is pushing to develop its leasing market by scaling up sales of land sites to build rental homes across the country, providing tax breaks for residential service firms and granting tenants equal rights to homeowners.

The Shanghai government has allocated more land to develop rental housing. Photo: AFP
By the end of March, CCB’s Guangdong branch – where the “leasing rights” pilot scheme was launched – has received about 400 applicants and signed contracts with about 50 landlords. 
We have extended loans that help tenants to pay rent, but the largest input is not credit, but a portfolio of services throughout the industry chain
Wang Zuji, CCB

Liu Jun, head of the Guangdong branch, said the bank would not impose charges on landlords and tenants, as the underlying objective was to draw more wealthy individuals to become CCB customers.

“A bigger house in Guangzhou is valued for at least 5 million yuan (US$793,419) and the owner surely is a premium customer,” said Liu. 

CCB has been seeking out bigger landlords, such as state-owned enterprises, developers and government-backed institutions to secure their idle assets so that the bank can rent the properties out collectively to tenants.  

Wang Yi, general manager of CCB residential finance department, said as a broker, CCB provided credibility to landlords and tenants. After securing SOEs as clients, the bank could also win other businesses for services such as deposits and corporate payroll.

He also dismissed concerns that CCB’s lending to renters would push up rents, arguing that the average loan for long-term rental payment is 80,000 yuan. Previous reports said renters can borrow up to 1 million yuan.

“All of our efforts are to encourage long-term lease, and that kind of lease could flatten the rent, instead of inflating it,” Wang said.

This article appeared in the South China Morning Post print edition as: Construction Bank gears up for home leasing business
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