China is aiming to mobilise up to CNY1tn ($148bn) of loans for several stalled property constructions, in an effort to revive the crippling real estate sector and ward off backlash from homebuyers, reported Financial Times, citing people aware of the matter.

The People’s Bank of China (PBoC) will initially issue about CNY200bn of low-interest loans, at an annual internet of 1.75%, to state commercial banks, according to the sources.

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As per the plan, which was recently ratified by China’s State Council, the banks will utilise the PBoC loans as well as their own funds, to refinance the halted property developments.

The government expects that the banks will be able to leverage its initial funding by up to five times to raise a total of about CNY1tn and partially bridge the funding gap required to finish incomplete projects, the people said.

However, there are concerns that PBoC may struggle raise the amount because of the difficulties banks will have to face in making a return from the stalled projects.

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Following stricter credit controls, property developers in the country have defaulted on loans, both domestic and overseas.

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In Tier III cities, housing transactions dropped by over a third in July 2022 compared to the same period a year ago even though local authorities have tried to energise the sector by offering several support measures to increase buyer demand, such as reducing interest rates and offering subsidies on house purchases.

As per the estimates of Everbright Bank, property developers have suspended construction work on as many as eight million homes.

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Image: In Tier III cities, housing transactions dropped by over a third in July 2022. Credit: F. Muhammad from Pixabay.