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Chinese city loosens rules for developers amid cash crunch

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Beijing (AFP) – The Chinese city of Chengdu has announced measures to make it easier for developers to sell properties, making it the first to ease restrictions on the sector which has come under intense pressure following a debt tightening by Beijing.

The announcement comes after several real estate companies – led by industry giant China Evergrande – were plunged into a financial crisis last year after China embarked on a regulatory campaign to end speculation and to indebtedness.

This left them struggling to honor their debts as they couldn’t get rid of the properties or borrow more money.

But on Wednesday, the southwest city said it would speed up approvals for home sales and mortgage loans, while easing restrictions on the use of pre-sales proceeds.

The move makes the capital of Sichuan province the first to tackle problems facing developers, as officials face mounting pressure to take control of a crisis, some fears could hammer in the crucial real estate sector .

Beijing was showing signs of pulling back from its hard line on the real estate sector, and in September the central bank called on financial chiefs to help local governments support the housing market as China’s economic growth slows to its slowest pace in decades.

The crisis has been highlighted by the struggles of Evergrande, who is drowning under a sea of ​​$ 300 billion in debt and at risk of collapsing, a situation many fear will spill over into the world. Chinese economy at large and possibly the world.

Evergrande has so far been successful in paying its debtors, helping it avoid default, but challenges remain.

Another developer, Kaisa Group, has announced a plan to postpone the repayment schedule of some of its bonds, offering an exchange of at least $ 380 million of notes to avoid a potential default.

The company said in a filing that “the continued tightening of government policy, multiple credit events and deteriorating consumer confidence have resulted in the temporary closure of various refinancing platforms for the industry.”

It has also “put enormous pressure” on short-term liquidity, and its existing resources may be insufficient to repay existing bonds due Dec. 7, the company added.

If the swap is not successful, Kaisa added that he would consider debt restructuring.

Its Hong Kong-listed shares climbed nearly 20% as their trading resumed after a three-week suspension.

A separate statement on Thursday showed Kaisa would sell a residential site in Hong Kong to a joint venture involving Far East Consortium International and New World Development.