Chinese banks warned against real estate investments

China’s bank regulator has urged banks to guard against risks in commercial real estate projects that have been targeted by speculative investment.

China’s measures aimed at curbing excessive home price rises have resulted in some speculative capital flowing into commercial properties. Thus banks should strictly monitor risks when they make loans to commercial property projects and set a higher criteria for approving such loans than for home mortgage.

Banks are banned from rolling over existing loans to commercial properties and they should improve collateral management to guard against possible risks.

The new order also asked banks to monitor property market risks in second- and third-tier cities where purchase restriction policies have not yet been imposed.

Beijing has expanded the home purchase restrictions to some second- and third-tier cities to rein in home prices. It also urged local governments to step up efforts to cap property prices within a previously set ceiling.
China’s property investment and sales in August grew at a slower annual pace than in the first seven months, official data showed on Friday, indicating Beijing’s efforts to rein in the red-hot real estate sector have started to have the desired effect.

The full story is available at China Daily.