China News Service, Beijing, August 5 (Reporter Pang Wuji) Since August 20, 2020, the Ministry of Housing and Urban-Rural Development of China and the People's Bank of China have held a symposium on key real estate companies and announced the formation of key real estate companies' fund monitoring and financing management rules.

This new regulation on financing for housing companies, known as the "third-tier and fourth-tier", has been implemented for nearly a year.

　　The so-called "three lines and four gears" use the three core financial indicators of "debt ratio excluding advance receipts", "net debt ratio" and "short-to-cash debt ratio" to divide the debt scale of real estate companies and control the debt scale of real estate companies.

According to the industry’s summary, if all three indicators fail to meet the standards, they are classified as “red files”, and the scale of interest-bearing liabilities cannot be increased; if two or one indicators fail to meet the standards, they are classified as “orange files” and “yellow files”. The annual growth scale of interest-bearing liabilities is limited to 5% and 10% respectively; if all three indicators meet the standards and enter the "green file", the annual growth of the scale of interest-bearing liabilities cannot exceed 15%.

　　As one of the important methods of real estate financial regulation, how much impact will the new “third-line and four-tier” financing regulations have on the industry?

　　A research report released by the Shell Research Institute on the 5th shows that if all real estate companies implement the requirements of the "third-tier and fourth-tier" interest-bearing debt scale growth requirements, according to the time point of the policy launch, only among the top 100 real estate companies Of the 60 listed real estate companies are expected to reduce their interest-bearing liabilities by approximately RMB 937.1 billion annually.

This will be conducive to the steady operation of the real estate industry, effectively preventing systemic financial risks, and at the same time optimizing the allocation of resources in the whole society.

　　It is worth noting that in less than 4 months after the implementation of the policy, the debt scale of many real estate companies has collectively "downgraded."

The Shell Research Institute calculated the 2020 annual report released by real estate companies and found that out of 100 listed real estate companies last year, 40 claimed to have successfully achieved downgrades compared to 2019, with a downgrade rate of 40%.

The number of "zero-footprint" real estate companies jumped from 17 in 2019 to 29 in 2020.

　　Pan Hao, a senior analyst at the Shell Research Institute, believes that the current stage is more testing the security and stability control of housing companies in the process of reducing debt, and a correct understanding of the actual purpose of regulatory policies.

　　In addition, Pan Hao reminded that in the debt structure of real estate companies, in addition to interest-bearing liabilities, there are also non-interest-bearing liabilities, the scale of which should not be underestimated.

Moreover, in addition to on-balance sheet liabilities, real estate companies also have off-balance sheet liabilities.

Real estate companies use subsidiaries, affiliated companies, etc., to externalize the on-balance sheet debts, which hides part of the debt risk.

The potential risks of these "hidden" debts also need to be fully vigilant.

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