Real estate is an important pillar industry of China's national economy, and it is also an important field to prevent and resolve systemic risks. In August, 2020, the Ministry of Housing and Urban-Rural Development and the Central Bank held 12 symposiums for key housing enterprises, explicitly demanding to improve the marketization, standardization and transparency of housing enterprise financing, and conveying the new financing rules of "three red lines", that is, "the asset-liability ratio of housing enterprises without advance payment shall not be greater than 0.7, the net debt ratio shall not be greater than 1 times, and the short-term cash debt ratio shall not be less than 65,438+0. It is a positive measure for the regulatory authorities to improve the housing market supply system and steadily implement the long-term real estate mechanism in recent years, which is of great significance to curb the blind expansion of high-debt housing enterprises.

New regulations for marking "three red lines" in the overall situation of housing enterprises

In the development and construction cycle, housing enterprises have a large investment scale and are highly dependent on external financing, and their "high leverage" characteristics contain huge financial risks. Once the financial risks of real estate enterprises are exposed, it will easily lead to debt default events and negative chain reactions in the industry, which will aggravate market expectations and economic fluctuations. The government attaches great importance to the fund supervision of real estate enterprises. The new financing rules of "three red lines" limit the radical expansion of real estate enterprises, but there are also some structural problems such as rising financing costs of some real estate enterprises and poor circulation of capital chains, which makes it difficult for market participants to form stable expectations for the future development of the real estate market. In order to comprehensively and objectively reflect the changing trend of housing enterprises' debt risk, based on the "three red lines" regulatory indicators, this paper takes the quarterly data of listed housing enterprises in Shanghai and Shenzhen A-shares from the first quarter of 20 10 to the second quarter of 2022 as the research sample to measure the situation of housing enterprises stepping on the line. The main data sources of this paper are CSMAR database and ***3979 effective data of housing enterprises.

Asset-liability ratio after deducting advance receipts

The asset-liability ratio excluding advance receipts is an indicator of the high proportion of sample real estate enterprises, and its calculation formula is: (total liabilities-advance receipts-contract liabilities)/(total assets-advance receipts-contract liabilities), which is required by the regulatory authorities not to exceed 0.7. According to the calculation results of sample real estate enterprises (see figure 1), the asset-liability ratio of real estate enterprises after excluding advance payment is basically stable at 0.6-0.7, after 20 10 to 20 16 and after 20 16, the overall situation shows an "increase". In the second quarter of 2022, the average asset-liability ratio of real estate enterprises excluding advance payment was 0.66, which was basically the same as before the introduction of the new regulations of "three red lines".

Judging from the fact that enterprises meet the standards, among the 80 sample real estate enterprises in the second quarter of 2022, the asset-liability ratio of 35 enterprises excluding advance payment is greater than 0.7, and the number of enterprises stepping on the line is lower than that of 40 enterprises in the second quarter of 2020, but the proportion of enterprises that fail to meet the standards is still high. The high debt of real estate enterprises is a long-term accumulation problem, and it is difficult to reduce leverage in the short term. From the perspective of real estate control objectives, reducing the leverage ratio and debt of enterprises will still be a long-term normalization work. Further analysis of the risks of enterprises with different asset sizes in the second quarter of 2022 shows that compared with small and small-scale enterprises, the asset-liability ratio of medium-sized and above real estate enterprises excluding advance receipts is higher, and the number of enterprises exceeding the regulatory threshold of 0.7 accounts for a larger proportion. Considering that the debt risk of large real estate enterprises is more likely to aggravate the instability of market expectations, the situation of preventing and resolving risks is more severe, and the structural problems of industry risks need to be highly valued.

Net debt ratio

In the new regulation of "three red lines", the net debt ratio reflects the relative scale of interest-bearing liabilities of real estate enterprises and the security of capital chain, and its calculation formula is: (interest-bearing liabilities-monetary funds)/net assets. When the net debt ratio is too high, it means that the housing enterprises need to pay corresponding increased interest expenses in each period, and use high leverage to seek high returns from shareholders, and the business risks of enterprises will also increase. According to the regulatory requirements, the net debt ratio of housing enterprises shall not be greater than 1.

Figure 1 Trend of "Three Red Lines" Indicators of Real Estate Enterprises

Data source: calculated according to the national Taian database.

According to the calculation results (see figure 1), the average net debt ratio of housing enterprises showed a rapid upward trend from 20 10 to 20 15, and began to fluctuate and fall back after 20 16, but the overall situation was still at a high level. The data of the second quarter of 2022 shows that the average net debt ratio of 80 sample real estate enterprises is 1.52, which is significantly higher than 0.86 in the second quarter of 2020. Among them, 27 enterprises failed to meet the regulatory requirements that the net debt ratio was lower than 1, which was higher than the number of 24 unqualified enterprises in the second quarter of 2020. Similar to the distribution of asset-liability ratio after excluding advance payment, the net debt ratio of real estate enterprises above medium scale is higher, there are more companies stepping on the line, and the degree of industry differentiation is obvious. Due to information asymmetry, compared with small real estate enterprises, enterprises above medium scale often have stronger credit negotiation ability, less financing constraints, and greater cumulative risk of interest-bearing debt expansion.

Cash short-term debt ratio

The short-term debt ratio index reflects the liquidity and short-term solvency of real estate enterprises, and can describe the short-term cash flow pressure and security of enterprises to some extent. Its calculation formula: monetary funds/short-term interest-bearing liabilities. The regulatory rules require that the cash short-term debt ratio of real estate enterprises should not be lower than 1, that is, the monetary funds held by real estate enterprises must cover short-term interest-bearing liabilities.

As shown in figure 1, the average short-term cash debt ratio of real estate enterprises has changed obviously since 20 10, but the average index values in the sample period are all greater than 1, which generally meets the regulatory requirements. Since 2020, the average short-term cash debt ratio of real estate enterprises has generally shown an "inverted U-shaped" trend. In the second quarter of 2022, the average value of this indicator was 1.47, of which 36 enterprises failed to meet the standard, and the number of enterprises stepping on the line increased compared with the second quarter of 2020, with a high proportion of medium-sized enterprises stepping on the line. Compared with the asset-liability ratio and net debt ratio after excluding advance payment, real estate enterprises can improve the short-term debt ratio of cash at a lower cost by accelerating the withdrawal of funds and adjusting the structure of long and short debts, thus gradually realizing the goal of "three red lines". At this stage, the real estate enterprises have great debt repayment pressure. If monetary funds are mainly used to pay due debts, the financial flexibility of enterprises will be limited and their daily investment and operation will also be affected. Therefore, how to revitalize the cash flow and stabilize the capital chain, grasp the development and sales rhythm, monitor and warn the operating cash flow in advance and stabilize the liquidity of assets is directly related to the financial situation and anti-risk ability of real estate enterprises.

Cause analysis of current debt of housing enterprises

The debt problem of real estate enterprises is closely related to the property of real estate industry and its "high leverage" operation mode. In the early stage of real estate development, a lot of money is needed to buy land, move and cover construction costs, so the capital chain is regarded as the lifeline of real estate development enterprises. In the period of rapid expansion of the real estate market, due to the high profit rate of the industry and the rapid return of funds, market funds have flooded into real estate development and investment, which is prone to "tidal phenomenon". During the "climax" period, every real estate development enterprise has high income expectation for its investment projects. Local governments often provide relevant policy support for political achievements and land transfer fees. Financial institutions also actively provide financing channels for housing enterprises under the influence of "herding behavior", and all kinds of housing demand subjects will also spend generations of savings to buy houses. Since 20 17, the central government has strictly controlled the supply and demand sides of the real estate industry, and the market has gradually returned to rationality, and real estate investment has gradually "ebbed". The overall profit rate of the real estate industry has gradually decreased, while the development costs such as land cost, labor cost, financial cost and relocation and resettlement cost have gradually increased, and the debt problem of housing enterprises has become increasingly prominent.

Judging from the financing structure of real estate development enterprises in China, the proportion of indirect financing (mainly including bank loans and trust loans) has been running at a high level of over 90%, while the proportion of direct financing (mainly including stock financing and bond financing) has rebounded slightly in recent years, but it is still hovering at a low level below 10%. In indirect financing, the loan source of domestic financial institutions has always been the first. Compared with the overall indirect financing ratio of non-financial industry, the financing structure imbalance of real estate development enterprises is more serious. The indirect financing of real estate development enterprises, especially the excessive credit, and excessive dependence on the financing structure of bank financial institutions lead to their weak ability to resist debt risks, which makes the debt problem of the industry easy to spread in the system of bank financial institutions. Since the outbreak of COVID-19, the debt maturity of the real estate industry is unreasonable, and the suspension of loans and supply in some areas has led to the withdrawal of pre-sale funds, further increasing the capital chain risk of centralized debt repayment forward housing enterprises.

Attach great importance to and focus on preventing and resolving related risks.

Real estate finance is systematic, and the debt problem of housing enterprises can easily be transformed into the operational risk of banking institutions, and improper handling may form regional or systemic risks. Under the regulatory pressure of the new "three red lines" of financing, "reducing leverage" has become the biggest test question and task for all housing enterprises in the future. On March 16, 2022, the State Council Financial Stability and Development Committee held a special meeting, pointing out that "regarding real estate enterprises, it is necessary to study and put forward effective risk prevention and resolution plans in time and put forward supporting measures for transforming into a new development model". Therefore, we must attach great importance to the new "three red lines" financing regulations and its subsequent impact, and take this opportunity to force the transformation of the development model of housing enterprises and accelerate the stable and balanced development of the real estate market.

Improve the forward-looking financing strategy of real estate enterprises, optimize the financing structure and expand diversified financing channels. Encourage real estate enterprises to expand the proportion of direct financing, accelerate the securitization of real estate assets, promote the real estate trust and investment funds to enter a standardized track, support the reasonable financing needs of corporate bonds, trusts and funds, and reduce the policy distortion in financing links. Banking financial institutions should do a good job in the risk disposal projects and financial services of key real estate enterprises in mergers and acquisitions, implement and promote the separation of M&A loans, affordable lease loans and real estate development loans, form an effective incentive mechanism according to the principle of marketization, mobilize the enthusiasm of real estate enterprises in mergers and acquisitions, speed up the disposal of existing projects of real estate enterprises in danger, and promote risk resolution and market clearing. Real estate enterprises strive for long-term debt to replace short-term debt, control costs and financing costs, introduce professional asset management companies, selectively sell funds returned from projects, and strive for time and space to realize debt restructuring, extension and payment. Revitalize sales receipts and supervise account funds, repair corporate balance sheets, improve corporate refinancing capabilities, strengthen industry information disclosure, and stabilize market sentiment and industry expectations.

Actively promote the transformation of real estate enterprises to a new development model, explore new growth points of the industry, and establish confidence in the development of the real estate industry. At present, real estate enterprises should balance the quality and construction cost of projects under construction, ensure that funds, labor and supply materials are in place, take safeguarding the legitimate rights and interests of housing consumers as the bottom line, maximize the "guaranteed delivery" and repair the corporate brand image. Actively integrate existing resources, explore cooperative land acquisition, cooperative development, mergers and acquisitions and other modes among enterprises, and enhance the competitiveness and market position of enterprises. From the perspective of sustainable development, real estate enterprises should change from extensive development to refined service mode, from incremental business to stock service, actively adjust land acquisition and business strategy, and make reasonable decisions on investment scope and business layout. In line with the policy of "living in houses without speculation" and the market environment, we will expand projects such as affordable rental housing, urban renewal and renovation of old residential areas, pay attention to old-age real estate, industrial real estate, cultural tourism real estate and property services, and promote the transformation of real estate enterprises from scale expansion with high leverage and high turnover to stable operation with light assets.

Pay close attention to the spillover and diffusion effects of financial risks of real estate enterprises and strengthen the early warning of liquidity risks. We will continue to maintain the determination of regulatory policies, increase the penetrating supervision of off-balance-sheet liabilities, commercial bills and "real debts" of real estate enterprises, prevent enterprises from evading the supervision of interest-bearing liabilities, and prohibit financial institutions from illegally entering the real estate market. In view of the liquidity risk that has occurred or may occur, the relevant departments can set up a special working group to do a good job in policy guidance and risk prevention and control, so as to avoid the rapid depreciation of the remaining assets of real estate enterprises and control the risk within a reasonable range as soon as possible. The regulatory authorities should build a multi-dimensional evaluation and disposal plan to deal with the spillover and diffusion mechanism of risks. In the macro-control system, the abnormal fluctuation of financial risks of real estate enterprises can be regarded as the signal index of regulation, so as to realize early identification, early warning and early resolution of risks, and actively support local city investment and state-owned enterprises to participate in the revitalization of insurance projects. Accelerate the improvement of the policy-oriented financial system, guide financial resources into the real economy, affordable livelihood projects and infrastructure through targeted incentives, and fundamentally optimize the rational allocation of credit funds of financial institutions.

Accurately grasp and implement the prudent management system of real estate finance to ensure the reasonable capital demand of the virtuous circle of real estate industry. Further improve the flexible, accurate, reasonable and appropriate real estate financial policies, prevent "one size fits all" and "overweight at different levels" in the implementation process, and promptly correct the short-term market pressure response. Prevent the hard landing of the real estate market, keep the credit stable and orderly, and meet the reasonable demand for real estate purchase from the supply side and the demand side. According to the situation of the real estate market, the regulatory situation and the operating conditions of enterprises, all localities can moderately relax the supervision policy of pre-sale funds, extend the payment period of land transfer fees, optimize the payment methods of land transfer fees, and flexibly adjust the conditions for applying for pre-sale certificates. For projects under construction of real estate enterprises that have been pre-sold, have insufficient short-term cash flow, and are expected to have better comprehensive benefits, pre-sale supervision funds can be allocated according to the progress of new projects, and special loans or preferential policies can be provided in a targeted manner to moderately speed up loan approval and lending, thus alleviating the financial pressure of enterprises. To give full play to the advantages of regional deep cultivation of small and medium-sized real estate enterprises, local governments can give certain policy support to qualified enterprises based on industrial planning, competition pattern and urbanization process, and focus on promoting the construction of affordable rental housing.

Consolidate the main responsibility of local governments in real estate regulation and control, continuously stabilize the expectations of the real estate market, and reduce the negative impact of policy uncertainty on market players. We will continue to implement the regulatory keynote of "staying in houses without speculation" and the regulatory objectives of "stabilizing land prices, housing prices and expectations", pay close attention to the financial risks of real estate enterprises and the risks derived from local debts, and adjust policies and measures according to the city's policies, classified guidance and refinement. Continue to maintain the consistency, continuity and stability of real estate policies, strengthen policy communication, improve policy transparency, clarify phased control measures and policy trends, and help the market form stable development expectations. Relevant departments should promptly respond to the hot issues concerned by the market, do a good job in public opinion guidance and policy follow-up, actively promote the work of guaranteeing the delivery of houses, curing uncompleted residential flats and resuming the work of real estate, resolutely prevent the media and intermediary platforms from taking the opportunity to speculate, increase the supervision of project construction and pre-sale project funds, rectify the real estate market order, optimize the market business environment, and stabilize industry expectations. Further strengthen the coordination of policy formulation and implementation between departments, form a joint force of regulation and control, strive to maximize the effect of regulation and control, continue to strengthen the introduction of relevant supporting measures, improve the housing market system and housing security system, and promote the virtuous circle and healthy development of the real estate industry.

Author: Li Chao Mo Dongcui, National Institute of Economic Strategy, School of Applied Economics, China Academy of Social Sciences.