New | Insurers, private equity funds take slice of property lending pie from China's banks
Small developers are turning to the capital markets for financing as they fail to secure loans from banks
Strict global bank lending rules set to come into force by 2019 are already redrawing the financial landscape for China's real estate developers, pushing up credit costs across the board and restricting bank loans to all but the most blue-chip borrowers in the sector.
Under Basel III, the new global capital requirement standard for banks, lenders must put aside more capital for reserves when lending to borrowers assessed to be riskier than others.
In real estate, this has created a two-tier world where developers approaching banks for new projects have been flatly declined. Borrowers wanting loans for near-completed or existing properties - where there is essentially collateral to lend against - are more likely to be granted credit lines.
"Banks have stopped their lending in development financing, especially for smaller and medium-sized developers," said Ada Choi, the head of capital markets at real estate investment advisory CBRE.
This is pushing more developers towards the capital markets.
Developers with formal credit ratings have the best options. They are free to tap into a plethora of alternative means of financing and big Chinese developers have recently been among the most active issuers of international debt.
