Caixin
Jul 24, 2021 06:40 AM
CHINA

China Probes Property Development Industry in Continued Housing Crackdown

What’s new: China’s housing ministry and seven other regulators are launching a probe into new construction by property developers in violation of regulations, failure to deliver housing on time and helping buyers to use business loans and consumer loans for mortgages, the agencies said Friday in a notice.

The measures are intended to further clean up irregularities in the property market, the regulators said. They reported that a two-year-old crackdown on chaotic practices by housing rental agencies has made significant progress but violations still take place. China aims to achieve a significant improvement in the order of the real estate market in the next three years, the agencies said.

In the rental sector, violations include providing consumer loans for tenants to pay rent, offering higher rent to landlords than amounts collected from tenants, demanding long-term rental payments of as much as a year while paying landlords on a monthly or quarterly basis, failure to manage rent in accordance with regulations and failure to publicly disclose property management fees and expenses, according to the notice.

Punishment for violations will increase, the notice said without elaborating. Companies with major operating risks, such as overdue debt repayment, large-scale delays in housing delivery and negative news, will be subject to key supervision, the notice said.

The background: The notice came after the collapse of Danke Apartment, one of China’s largest online apartment rental platforms, sent shockwaves through China’s massive rental market and sounded alarms over the online rental industry’s debt-fueled growth.

Danke and competitors rent flats from landlords on long-term leases and then sublet the properties to tenants after making renovations. Last year, a pandemic-driven cash crunch at Danke resulted in the eviction of thousands of tenants even though most had already paid rent, which eventually led to widespread clashes between landlords and tenants.

Since late last year, Beijing has been stepping up curbs on illicit borrowing for property speculation, including restricting funding for property developers.

In March, the China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development and the central bank ordered a nationwide inspection of business loans targeting borrowers illicitly using individual or corporate business credit to speculate in the housing market.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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