China looks to reel in heavily indebted real estate sector

Government is forbidding private equity funds from investing in resi development

National Weekend Edition /
Aug.August 15, 2021 02:00 PM
China looks to reel in heavily indebted real estate sector

(iStock)

China is cutting off another source of money from residential real estate developers: private equity funds.

The government-endorsed Asset Management Association of China informed pe firms it would no longer accept registrations to set up such funds for real estate investment, according to Bloomberg.

It’s the latest step in the government’s effort to address ballooning debt in the residential development sector and stave off a housing bubble.

Earlier this year, the People’s Bank of China set caps on loans to developers and limited their mortgage lending.

Some of China’s largest developers are swimming in debt — Evergrande Group is the world’s most indebted developer with around $300 billion in liabilities. The company has billions of dollars in bonds maturing in the next year or so and its stock price has plummeted in the last year.

Despite wider concern over the stability of the sector, builders still find buyers for their bonds. Chinese real estate firms have sold $20.3 billion worth of bonds so far this year, the second highest total since 2017.

Private equity funds are a key source of money for developers in China and they only became more reliant on private equity dollars as the government restricted other sources of funding.

As of last year, investment into real estate-focused private equity funds totaled around $130 billion, or 13.5 percent of the sector as a whole.

[Bloomberg] — Dennis Lynch 





    Related Articles

    arrow_forward_ios
    Hudson’s Bay Company CEO Richard Baker and 609 North Avenue W in Westfield, NJ (Cornell, Google Maps)
    Shuttered Lord & Taylor targeted for Union County redevelopment
    Shuttered Lord & Taylor targeted for Union County redevelopment
    Golub’s Michael Newman and Azur Cos' Joseph McMillan Jr (Golub & Company’s, Studio Scrivo, SCB)
    New York developer pivots Chicago tower project
    New York developer pivots Chicago tower project
    Yonkers mayor Mike Spano with 354 and 358 Nepperhan Avenue (Google Maps, Yonkers NY, Getty)
    Yonkers greenlights $182M in residential, commercial projects
    Yonkers greenlights $182M in residential, commercial projects
    Justice Debra James and Elizabeth Street Garden (NYCourts, Elizabeth Street Garden, Getty)
    Judge’s two years of silence paralyzes Little Italy project
    Judge’s two years of silence paralyzes Little Italy project
    160 NYS Route 25 in Greenport, LI (Google Maps, Getty)
    Yellow light for Greenport project
    Yellow light for Greenport project
    (Photo Illustration by The Real Deal with Getty Images and Americasroof at English Wikipedia, CC BY-SA 3.0 - via Wikimedia Commons)
    Chinese firms bailing on US commercial market
    Chinese firms bailing on US commercial market
    A photo illustration of Adam Leitman Bailey (far left) and Miki Naftali (right) (Getty Images, Naftali Group, Adam Leitman Bailey, P.C.)
    Naftali tenant suffers blow in holdout battle
    Naftali tenant suffers blow in holdout battle
    Tiffany Cabán (right) and Sen. Jabari Brisport, and a rendering of the Hallets North project (Getty, Studio V, New York Senate Photo, CC BY 2.0, via Wikimedia Commons)
    In socialists we trust: Tiffany Cabán and the great housing breakthrough
    In socialists we trust: Tiffany Cabán and the great housing breakthrough
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...