China's home de-stocking push to bring developers little cheer

HONG KONG/BEIJING, June 10 (Reuters) - China's efforts to clear massive inventory by turning unsold homes into affordable housing are unlikely to help cash-strapped developers due to the programme's limited size and potentially low prices, analysts and developers say.

As part of a support package for the crisis-hit property sector, Beijing announced last month a plan for a 300 billion yuan ($41 billion) lending facility, which could result in 500 billion worth of bank financing for local state-owned enterprises (SOEs) to purchase completed and unsold homes.

Chinese banks are expected to extend cheaper loans to SOEs via the facility, backed by the central bank, to help them buy the homes from developers at "reasonable prices" to turn into affordable housing.

Some private developers, however, see very few, if any, of their projects being selected as the lending facility is inadequate and the scheme is only expected to launch in bigger cities where affordable housing is available. Price offers from SOEs are also likely to be low, they say.

The cautious attitude of developers could be a challenge for Beijing, as waves of support measures over the past two years fail to revive the sector, which at its peak accounted for a quarter of GDP and remains a major drag on the economy.

Xintangzhen, a town in Guangzhou, issued a notice on May 30, the first local government to do so after the support package, to purchase "suitable housing stock" for resettlement housing.

The local government would buy the homes at cost price, reported China Real Estate Business, a media outlet managed by the housing authority, citing the notice.

A project co-owned by stat...
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