China plans to start a real estate fund of up to $44bn to help property developers deal with debt crisis and restore confidence in the industry, reported Reuters, citing a state bank official aware of the matter.

The move would represent the first initiative by the state to help the struggling property sector since debt crisis became public in 2021.

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Initially, the size of the fund would be set at CNY80bn through support from the central bank, the People’s Bank of China (PBOC), the source stated.

Out of the CNY80bn, state-owned China Construction Bank will contribute CNY50bn billion. However, the money will be drawn from relending facility of PBOC.

If this approach works, other banks are expected to follow with a target of raising up to CNY200bn to CNY300bn.

According to the source said the fund will be used to finance the acquisition of incomplete residential projects and complete their construction, and then rent them to individuals as part of the government’s efforts to boost rental housing.

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The country’s property sector has been witnessing turmoil due to the debt crisis, credit tightening and the mortgage boycott. Authorities are scrambling to prevent the crisis in the sector from impacting the wider economy.

Last week, China Banking and Insurance Regulatory Commission urged lenders to offer loans to help eligible struggling property developers complete their unfinished housing projects.

An increasing number of homebuyers are withholding mortgage payments on incomplete housing projects across cities.

Banding together, homebuyers reportedly have stopped payments for already sold units in a minimum of 100 housing projects, according to data from industry groups.

It is estimated that there are around 220 incomplete residential projects across more than 80 cities.
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Image: The country’s property sector is witnessing turmoil. Credit: Kon Zografos from Pixabay.