Reduction in capital ratios: Life buoy for housing companies

Wen/Zhu Da Jiabao, April 29, chaired the State Council executive meeting, decided to cut 11 types of fixed assets investment capital ratio, including commercial housing.　　This is the 2004, the real estate development project Capital ratio 35% of the "Doomsday" first appeared loose.　　Developer investment will drop to the freezing point of 2008 can be said to be the most difficult year developers, because in the early stage of macro-control constantly upgraded conditions, the fiery real estate market into the cold winter, many developers of the capital chain appeared problems.　　In fact, before the financial crisis, the regulation of real estate has become more and more stringent, the proportion of its own funds has been one of the most difficult to endure the magic spell.　　September 2004, the CBRC promulgated the "Commercial Bank real estate loan risk Management Guideline" 16th stipulates that commercial banks to apply for loans to the real estate development enterprises, should require its development project capital ratio of not less than 35%.　　August 2006, the CBRC again publicly issued the "further strengthening of real estate credit management notice", requiring financial institutions to prohibit the proportion of project capital to less than 35%, "four card" is not in line with the loan conditions of the real estate development enterprises to issue loans, and stressed that real estate funds trust to comply with the rules.　　In fact, in the period of 2007-2008, commercial banks to lend to the housing enterprises, the proportion of their own funds required by 40%, many good projects because the proportion of capital is not qualified, can only give up the loan. According to the regulations, all the project capital is not in place, will not be able to obtain loans, can not start construction. This is a set in the developer's head a magic spell. Developers have already been very nervous, with this restriction, many housing enterprises can only give up land, development and resumption. The National Bureau of Statistics released data shows that the first quarter of this year, the country completed real estate development investment of 488 billion yuan, an increase of 4.1%, but down 28.2% compared with the same period last year. Among them, the proportion of real estate development investment in more than 70% of the commercial housing, completed investment of 342.2 billion yuan, down 31.5% from the same period last year. Restrictions on many conditions, allowing developers to take the land to build the unprecedented low. Although the recent rebound in the market, individual developers plan to copy bottom, but on the whole, holding a wait-and-see attitude of the developers still accounted for the majority. In some cities, land prices have been a fraction of last year, but many developers are reluctant to take them. The reason is very simple, if the real estate market consolidation time is prolonged, after taking the land can not be developed in time, all kinds of costs will make enterprises overwhelmed. More importantly, the capital ratio of 35% limit, so many development enterprises in the case of shortage of funds, difficult to start.　　The entire market cycle has stalled.　　Even if the land price drops to the original half, according to my understanding of the developers, they still choose to wait and see. The 35% per cent of the project's capital ratio in the housing sector is a magic spell, and the government has to untie itself in the face of a slump in the land market and the stagnation of many housing-enterprise projects. The author believes that the scale of the capital ratio should be reduced by 10About。 Because if you adjust too little, can not change the situation of the existing market, but if a sudden adjustment too much, and fear of increased risk.　　After weighing the live and risk, the 10% reduction is a relatively balanced point. The reduction in the proportion of project capital can effectively strengthen the leverage effect of funds, with a smaller amount of money to pry more projects.　　Before the need for 35% of the money to pry 100% of the capital, now only need 25% of their own funds can pry into the capital of 100%, which greatly promoted the utilization of funds, improve the capacity of the housing enterprise disposable funds, to ease the effectiveness of corporate capital pressure is obvious. Real estate stocks rose to the State Council to reduce the proportion of commodity housing capital, the stock market in the real estate sector has been a strong response.　　In the course of the counter-offensive of 4.28 so far, real estate plate as the lead plate, activated the bank plate, coal and oil plate and steel plate, such as the start of the market, and the rebound of the stock index is very strong, the main force for several days in a row, the Shanghai Composite index rebounded to 2,600 points above, and has continued to rise in space. In fact, the small spring market and the big rally in the stock market is synchronized. The rally has been stronger as the property market has been confirmed.　　More importantly, real estate is the economic leader, linked to a large, housing recovery can be identified as a sign of economic recovery. The positive correlation between the real estate sector and the economy has also allowed more institutions to look at the housing market as a barometer of equities. Since the Spring Festival this year, the main force to launch the spring Offensive without scruple is an important support is that the real estate market in rigid demand and the support of the policy, appeared in the small Yangchun.　　In this case, the A-share market has also launched a 1664 to 2,600 point of the big market, the stock index has risen almost 1000 points, the market confidence greatly increased. A strong signal to lower capital ratios if we look at the deeper level of capital ratios, it is clear that this is a policy that stimulates investment to expand domestic demand. Continued shrinking of real estate loans is not conducive to macroeconomic recovery. To boost real estate, in a broader sense, only accelerate urbanisation, releasing pent-up demand.　　The acceleration of urbanization process is conducive to the upgrading of the real estate market. The top ten industrial revitalization plans from the supply point of view to boost the economy, but now a lot of industry overcapacity is very serious, rashly increase production will aggravate excess. Now the key is to expand domestic demand. According to our country's reality, expanding domestic demand and increasing investment can only take the road of speeding up the urbanization process. Recently, management has significantly increased the intensity of this aspect.　　For example, Shanghai's dual-center construction, Nanhui into the greater Pudong, Shenzhen integrated Reform, the development of the Hercynian region, and so on, no one is not in the transmission of this information: urbanization process needs to accelerate. China's domestic demand is always not up, mainly the process of urbanization is hindered, leading to high savings rate and low consumption.　　It is now necessary to eliminate the obstacles to the process of urbanization, to meet the need to start domestic demand and expand the era of consumption. On the cityThe process of urbanization in Europe took nearly 300 years, while China spent only 30 years. The development of urbanization will inevitably lead to the scarcity of land, economic agglomeration effect also makes the land price appreciation.　　From the world's urban development, urbanization will promote the real estate market a huge leap, which is also the process of releasing huge economic energy. Under the background of acceleration of urbanization, the proportion of capital is reduced, which is beneficial to the enterprises to expand production by using funds, so that the whole cycle of the real estate market can continue.　　However, although the current volume of construction is on the rise, but the increase is not stable, just as the economic recovery is not consolidated, so the need for a moderate easing of housing enterprises. Some may be worried that a lower capital ratio would lead to increased risk for banks, and some may even think that this is a guide to the banks. In fact, the current risk of our financial system is not very large, the bank's deposit and loan gap is still very high, even if the adjustment to 25%, still above the international level, compared with the initial 20% is not low, will not significantly enlarge the bank risk. Again, there is a need to stimulate investment, because there is a greater risk of doing nothing.　　Once the housing enterprise capital chain breaks, the loss to the bank is bigger. It should be noted that the risk will not be significantly magnified, not to say no increase in risk, even if the 50% own funds, the project is not good or audit lax, the risk is 100%.　　Under the condition of market economy, there is no investment behavior without risk, the key is that banks should treat each loan prudently, and have perfect risk control mechanism. Commercial banks should actively explore new loan varieties. At present, many banks are cautious about the commercial property loans of real estate enterprises.　　As far as I know, some banks have tried to open fixed asset support loans, which is conducive to the holding of commercial property developers continue to expand the expansion of a good move. Author: Chairman of Shanghai Real Estate Brokerage Association, spring Sound Property (Group) Co., Ltd. China's senior financial and real estate critic.