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
    Prologis' Hamid Moghadam and 8819 E Edison Ave in Ontario (Google Maps, Prologis)
    Prologis gets option on 177 more acres in Ontario Ranch
    Prologis gets option on 177 more acres in Ontario Ranch
    Assembly Majority Leader Eloise Gómez Reyes (47th Assembly District, iStock)
    Inland Empire industrial developers dodge a bullet — for now
    Inland Empire industrial developers dodge a bullet — for now
    Darrin Olson of Realm and Northgate Gonzalez CEO Miguel Gonzalez Reynoso with renderings of Magnolia Flats (RealmRE.com, Northgate Market, iStock)
    Northgate Gonzalez fights ‘workforce housing’ project
    Northgate Gonzalez fights ‘workforce housing’ project
    Shaheen Sadeghi with  RTHM Long Beach (Shaheen Sadeghi, Brandywine Homes)
    Retail visionary Shaheen Sadeghi sees resi in his future
    Retail visionary Shaheen Sadeghi sees resi in his future
    No asking price, numerous offers as Rancho Palos Verdes campus hits market
    No asking price, numerous offers as Rancho Palos Verdes campus hits market
    No asking price, numerous offers as Rancho Palos Verdes campus hits market
    Rendering of 2641 West Olympic Boulevard (CORbel Architects)
    K-town developer envisions new hotel on Olympic
    K-town developer envisions new hotel on Olympic
    Developer Ilan Kenig and a rendering of 702 North Crescent (Nest Seekers Int'l, FMB Development, iStock)
    Spec developer eyes $35M manse in place of Beverly Hills teardown
    Spec developer eyes $35M manse in place of Beverly Hills teardown
    LVMH CEO Bernard Arnault along with a rendering of Cheval Blanc (LVMH, City of Beverly Hills Planning Division)
    LVMH gets go ahead for hotel on Rodeo Drive
    LVMH gets go ahead for hotel on Rodeo Drive
    arrow_forward_ios

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

    Loading...