On the last day of 2020, a document in the financial field was released, announcing that the real estate industry has officially entered a new era.

On December 31, the Central Bank and the China Banking and Insurance Regulatory Commission jointly issued the "Notice on Establishing a Concentration Management System for Real Estate Loans of Banking Financial Institutions" (hereinafter referred to as the "Notice"), which regulates the real estate loans of all corporate banks in China. Loan concentration is managed.

Specifically, corporate banks are divided into five tiers, and upper limits are set for the proportion of real estate loans and personal housing loans according to the different tiers of each bank. Among them, the former shall not exceed 40%, and the latter shall not exceed 32.5%.

The "Notice" will be implemented from January 1, 2021.

This document is considered part of the "Real Estate Financial Prudential Management System". Although the quota ratio is not harsh and the regulators have given a certain transition period, the signaling significance of the policy cannot be ignored. .

Over the past few years, real estate control policies have been almost stringent in restricting home buyers. The introduction of a series of "restriction" policies such as purchase restrictions, loan restrictions, and sales restrictions, while protecting urgent needs, also makes it increasingly difficult for home buyers to "increase leverage." In August 2020, the "Three Red Lines" policy was proposed to quantitatively manage financing needs from the perspective of real estate companies. The launch of the centralized management system for "mortgage-related loans" is a tightening of the capital supply side. It is not only part of the supply-side structural reform, but also considered an important part of the long-term mechanism.

Assess the proportion of real estate loans in five tiers

According to the provisions of the "Notice", corporate banks will be divided into five tiers. Specifically: 6 major banks + China Development Bank are in the first tier, 12 joint-stock banks + Agricultural Development Bank of China + Export-Import Bank + Beijing, Shanghai, and Jiangsu banks are in the second tier, private banks + city commercial banks except Beijing, Shanghai, and Jiangsu + Rural cooperative medical institutions in large and medium-sized cities and urban areas are in the third tier, county rural cooperative medical institutions are in the fourth tier, and rural banks are in the fifth tier. Rural cooperative institutions include: rural commercial banks, rural cooperative banks, and rural credit cooperatives.

In terms of indicators, the upper limit of bank real estate loans and personal housing loans in the first tier are 40% and 32.5% respectively, the second tier is 27.5% and 20% respectively, and the third tier is respectively 22.5%, 17.5%, the fourth gear is 17.5%, 12.5%, and the fifth gear is 12.5%, 7.5%.

According to regulators, the above-mentioned tranches are determined based on factors such as the asset size and institutional type of banking financial institutions, and the setting of management requirements takes into account the bank type, existing real estate loan business status and future space.

It is worth mentioning that in order to support the vigorous development of the housing rental market, housing rental-related loans are temporarily not included in the calculation of the proportion of real estate loans.

The "Notice" will be implemented on January 1, 2021, based on the data at the end of December 2020, and will provide a two-year and four-year transition period for different excess proportions. At the same time, it is clarified that various localities can appropriately adjust the management requirements for real estate loan concentration within the range of an increase or decrease of 2.5 percentage points based on the local economic and financial development level and other characteristics.

In addition, in order to cooperate with the implementation of the new asset management regulations, real estate loans returned to the balance sheet during the transition period of the new asset management regulations (to the end of 2021) will not be included in the statistical scope.

Banks are one of the most important sources of funds for real estate companies. A person from a financial institution told a reporter from the 21st Century Business Herald that including development loans, mortgage loans, non-standard financing, credit loans and other channels, the loan amount that real estate companies obtain from banks every year is around 5 trillion, accounting for About 30% of its funding sources. Therefore, the quota management of banking financial institutions will soon attract industry attention.

However, most people in the industry believe that this requirement is not harsh in terms of quota alone.

Xu Xiaole, chief analyst of Shell Research Institute, told the 21st Century Business Herald that as of the end of the third quarter of 2020, the balance of commercial real estate loans accounted for 28.8% of the loan balances of financial institutions, and personal housing loans The balance accounted for 19.8% of the loan balances of financial institutions, and the average level was lower than the management target limit. The currently set management ratio requirements are basically in line with the situation in 2020, which means that the total amount of quota put on the market in 2021 will not change significantly.

At the same time, the supervisory authorities set a transition period based on the actual situation of the bank at the end of the year. The higher the regulatory requirements, the longer the transition period, allowing banks and loan entities to have enough time to make smooth adjustments and avoid excessive Big changes. Therefore, Xu Xiaole believes that "this plan will not have a big impact on the short-term market."

The relevant persons in charge of the two ministries also made this clear. According to reports, since 2019, the Central Bank and the China Banking and Insurance Regulatory Commission have conducted extensive research on the real estate loan concentration management system and fully communicated with financial institutions. "Currently, most banking financial institutions meet the management requirements."

However, the role of the new regulations in "closing loopholes" cannot be ignored. According to the Shell Research Institute, the new regulations implement differentiated management requirements and formulate tiers based on scale and risk prevention and control capabilities. This means that in the past, the space for "small banks" to expand this part of their business through more "flexible" personal housing loan policies will be limited, and the management of personal housing loan interest rates, qualifications, etc. will be more stringent.

The road to deleveraging

Over the past few years, real estate control policies have been almost stringent in restricting home buyers. The introduction of a series of "restriction" policies such as purchase restrictions, loan restrictions, and sales restrictions, while protecting urgent needs, also makes it increasingly difficult for home buyers to "increase leverage."

Under the framework of supply-side structural reform, starting in 2020, the process of "deleveraging" in the property market will gradually extend to the financing links of real estate companies.

On August 20, 2020, the Ministry of Housing and Urban-Rural Development and the People's Bank of China held a symposium on key real estate enterprises in Beijing, proposing for the first time the implementation of a prudent management system for real estate finance and strengthening the marketization and regularization of real estate enterprise financing. and transparency. The meeting also proposed that the financing of real estate companies should be managed based on the principle of "three red lines".

The so-called "three red lines" refer to the three indicators set for real estate companies: the asset-liability ratio after excluding advance receipts is greater than 70%; the net debt ratio is greater than 100%; and the cash-to-short-term debt ratio is less than 1 times. , according to different contact situations, companies are divided into four grades of "red, orange, yellow, and green" to quantitatively manage the growth rate of interest-bearing liabilities.

It is reported that the "Three Red Lines" have had a substantial impact on the real estate industry. Recently, real estate companies have made substantial adjustments in terms of sales collection, land acquisition to sales ratio, and bond issuance scale growth. Some Companies have also set specific downshift deadlines.

According to Xu Xiaole, the "three red lines" are management on the demand side of funds, while this centralized management system for "housing loans" is a tightening on the supply side of funds.

He also believes that the centralized management of "housing-related loans" is not only part of the "real estate financial prudent management system", but also an important part of the long-term mechanism of real estate. In the future, this policy, together with the "three red lines", will become the norm in property market regulation.

Most interviewees pointed out that as the management of the capital supply side is tightened in an all-round way, the "deleveraging" action in the real estate field will also be fully launched.

Xu Xiaole pointed out that the real estate market regulation in recent years has mainly been carried out in the direction of "deleveraging". The main purpose is to reduce and prevent real estate financial risks and promote the balanced development of real estate, finance and the real economy. He said that in the past period of time, a relatively high proportion of real estate was involved in financial credit, which not only increased the leverage level of enterprises and residents, but also occupied social credit resources, which was not conducive to building a domestic cycle.

A person from a real estate company in Beijing told a reporter from the 21st Century Business Herald that the real estate industry will enter a new stage. After the demographic dividend and land dividend gradually fade away, the financial dividend is also disappearing. In the future, the real estate market will bid farewell to high growth due to dividends and enter a stage of stable development.