New policy for rental housing in pipeline

China recently issued draft opinions on financial support for the development of the home rental market.

Experts said the aim is to accelerate the transition of China's housing market toward a new development pattern by establishing a housing system that encourages both home purchase and renting.

The People's Bank of China — the country's central bank — and the China Banking and Insurance Regulatory Commission have drafted the opinions and are currently soliciting public comments.

"Reflecting China's adherence to the principle that 'houses are for living in, not for speculation', the draft opinions are aimed at providing financial support to the establishment of a long-term mechanism to support the real estate market, which combines home renting and purchase," said Zeng Gang, director of the Shanghai Institution for Finance & Development.

"In the past, China saw uneven development of its real estate market as its previous model of housing market development mainly relied on commercial housing, whereas long-term rental housing and low-rent homes were inadequately developed. Therefore, the country needs to vigorously develop the long-term rental housing market," said Zeng.

As the return on investment in long-term rental housing may be lower compared to commercial housing, it is necessary to expand funding channels of real estate developers, enabling them to obtain funds via financing tools like real estate investment trusts and financial bonds, he said.

The draft opinions will promote financial product and service innovation, investment and financing channel construction, and compliance management in the housing rental finance market, said Ye Huaibin, a researcher at the BOC Research Institute.

China will support commercial banks to issue loans for new long-term rental housing projects and reconstruction projects to various entities. Banks should actively grasp the policy direction and expand the housing rental finance market steadily and prudently. They ought to step up credit support for home leasing companies so that the companies will increase the supply of rental housing to key groups in key areas, said Ye in a research report on Sunday.

At the same time, banks must strictly regulate the provision of housing rental financial services, improve their abilities in judging the attributes of rental housing projects, enhance the professional level of loan reviews, and ensure that the funds are used in compliance with laws and regulations, he said.

The draft opinions encourage commercial banks to strengthen the innovation of housing rental credit products and service models, as well as broaden the investment and financing channels of the housing rental market. At the same time, regulators will strictly prohibit financing for non-rental housing in the name of supporting home rental and urge banks to strengthen management of credit funds.

Ma Hong, senior researcher at the Zhixin Investment Research Institute, said rental housing will gradually become a major component of the real estate market in China.

As the real estate market develops healthily, demand for consumer goods in the downstream real estate industry, including construction and decoration materials, as well as upgraded home appliances and new energy vehicles, will continue to expand. It will become an important driving force for the long-term improvement of the Chinese economy, Ma said.