Supervision overweights multiple departments to strictly control the financing scale of real estate companies
In the past month or so, many departments have begun to release policy signals to regulate the real estate market and tighten financing valves for real estate companies. A few days ago, the Ministry of Housing and Urban-Rural Development and the People’s Bank of China held a symposium on key real estate companies in Beijing to form key real estate companies’ fund monitoring and financing management rules. Prior to this symposium, the relevant regulatory authorities had intended to release relevant signals, clarifying that real estate companies should focus on reducing the scale of debt and the debt ratio for a long time in the future.
According to industry insiders, under stricter supervision of real estate financing, the real estate industry must accelerate capital turnover and reduce the rate of land acquisition on the one hand, and on the other hand, it must adjust its asset structure in an all-round way and carefully deploy its business. On the whole, policy tightening aims to further prevent and defuse real estate financial risks. Since the real estate industry has been gradually adjusting its asset structure in recent years, it will not bring greater financial risks due to adjustments.
Debt financing management valve tightened again
On August 20, 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. The meeting pointed out that in order to further implement the long-term real estate mechanism, implement the real estate financial prudential management system, and strengthen the marketization and regularization of real estate enterprise financing And transparency, the People’s Bank of China, the Ministry of Housing and Urban-Rural Development, together with relevant departments, have formulated the rules for capital monitoring and financing management of key real estate enterprises based on extensive consultations in the early stage.
According to the reporter of "Economic Information Daily", there were 12 real estate companies participating in the conference, namely Country Garden, Evergrande, Vanke, Sunac, Zhongliang, Poly, Xincheng, China Shipping, Overseas Chinese Town, Greenland, China Resources and Sunshine City.
"These 12 real estate companies will control the total scale of financing debt." The person concerned revealed. It is reported that the clear financing management rules are the "three red lines" that have been rumored many times in the industry before: the asset-liability ratio of the real estate company after excluding the advance payment shall not be greater than 70%; the net debt ratio of the real estate company shall not be greater than 100%; "Cash short debt ratio" is less than 1. In addition, whether the land-to-sales ratio is too high and operating cash flow will also serve as important indicators for the regulatory agencies.
"The method of debt control is managed according to the specific situation of the company in the above-mentioned regulatory indicators, which is divided into four levels." The above-mentioned person said that if all the above three indicators "step on the line", the interest-bearing liabilities shall not increase; For the two “stepping on the line”, the annual growth rate of interest-bearing liabilities shall not exceed 5%; if there is only one “stepping on the line”, the annual growth rate of the interest-bearing liabilities can be relaxed to 10%; if all indicators meet the requirements of the regulatory authorities, then The annual growth rate of interest-bearing liabilities can be relaxed to 15%.
"Relevant management rules are not only to reduce debt, but also to promote the adjustment of asset structure." The above-mentioned person said that companies need to submit a downgrade plan at the end of September, including how to downgrade within one year and how to fully meet the "three red lines" within three years. "Adjustment. If the standard is not met, the supervisory authority will require financial institutions to restrict the full-scale debt of corresponding real estate companies. According to relevant sources, from January 1, 2021, the entire industry will fully implement relevant rules.
High debt expansion will be limited
Zhu He, a young researcher at the China Financial Forty Forum (CF40), wrote a few days ago that from the perspectives of cash ratio and asset-liability ratio to examine the sustainability of real estate corporate debt, since 2018, the sustainability of real estate debt has been It has deteriorated, but due to the recent lack of further increase in leverage, debt risks are still within control.
According to industry insiders, the overall debt growth rate of real estate companies has slowed down in recent years. However, the issuance of real estate companies in 2020 will still maintain a certain scale. Data from Refinitiv shows that as of August 24, real estate companies are in the domestic market this year. Bond issuance amounted to 57.8 billion U.S. dollars and the overseas market reached 21.9 billion U.S. dollars. The amount of bonds issued in the domestic market was close to the level of 62.3 billion U.S. dollars in 2019.
Xie Rui, senior analyst in the real estate industry of Oriental Jincheng, said that in the first half of 2020, the weighted average interest rates of real estate credit bonds, overseas bonds and trust product bonds were 4.22%, 8.09% and 7.94%, respectively. Real estate companies with high financing costs have relatively low overall credit ratings, average land reserves, relatively low sales collection rates, large debt scale, high financial leverage, and a high proportion of rigid debts such as non-standard debts, and concentrated short-term debt repayment pressure Big.
It is worth noting that after the previous concentrated expansion period, most real estate enterprises ushered in a concentrated repayment period. Liang Zhenbang, head of the Moody's China real estate industry analyst team, said that in 2021, the maturity of domestic and overseas bonds of 70 Moody's rated real estate companies will be about 95 billion US dollars, which is a relatively high level of maturity. . By 2022, the maturity volume will drop to around US$60 billion.
However, industry insiders generally believe that relatively large real estate companies have relatively strong competitiveness, controllable cash flow pressure, and low debt repayment risks, but some lower-rated housing companies have relatively higher debt repayment risks. "On the whole, the growth rate of debt of real estate companies has been slowing down in recent years, and rated developers generally have better control over cash flow, and have the ability and confidence to deal with bonds that mature in the next 12 months. But relatively speaking, some small-scale real estate companies are under greater cash pressure. In the past few years, most of the real estate companies that have encountered problems are small and medium-sized real estate companies.” Liang Zhenbang said.
Industry insiders also said that further tightening of the debt financing management valve aims to further prevent and resolve real estate financial risks. In addition, after the real estate industry has continuously implemented the spiritual requirements of "housing to live without speculation" in recent years, the industry's asset structure has improved, so there is room for adjustment, without the adjustments bringing greater financial risks.
It is inevitable for real estate enterprises to slow down and adjust the structure
According to industry insiders, under the background of strict control of debt, the expansion path of real estate companies relying on high leverage has been obviously restricted. In the future, real estate companies will have to reduce the speed of land purchase, accelerate the increase of inventory turnover, accelerate the sale of goods, and expand pre-sales. Model size. "For real estate companies that account for a relatively large amount of debt on the stock balance sheet, as well as those real estate companies whose sales were not high in the past few years but have been aggressively acquiring land this year, the new regulations will have a greater impact; The impact of debt-debt real estate companies is expected.” A head of the financial department of a real estate company said.
The rate of land acquisition by real estate companies may drop significantly. According to industry insiders, despite the impact of the epidemic, real estate companies have not slowed down the acquisition of land, and high-premium "land king" plots are frequently produced. "Controlling land acquisition and reducing land prices is also one of the important reasons for this financing management." The above-mentioned person said.
Xie Rui also said that, on the one hand, the control of financing scale will have an impact on the willingness of real estate companies to acquire land. Real estate companies will be more cautious in adding land reserves, increase the proportion of project-owned funds, and at the same time optimize the business area layout. , Pay attention to the deep cultivation of some high-quality city clusters, instead of blindly expanding the number of cities stationed in them. On the other hand, with the lack of a significant increase in the sales receipts of real estate companies and debt management, the development progress of the initial land bank of real estate companies may slow down, and the pressure on capital investment for projects under construction and proposed construction will further increase, which will affect the completion of construction. The rhythm of rotation has a drag effect. On the whole, under the background of declining willingness to add land reserves and slowing down of inventory development, the asset layout of real estate enterprises may decelerate.
"The most important countermeasures for real estate companies are to increase the sales return of real estate projects, increase capital reserves, and reduce dependence on bond issuance in the process of project expansion; secondly, it is necessary to adhere to a prudent financial policy and control the level of corporate leverage. Improve the precision of fund management, improve the efficiency of fund use, and actively carry out financing innovation; in addition, it is necessary to reduce or divest non-core businesses, focus on the main real estate business, and increase the recovery of accounts receivable and other receivables to reduce Occupation of real estate project funds by non-main business or other related parties." Xie Rui said.
Reporter Liang Qian Zhang Mo reports from Beijing