Home rental sector to see changes following entry of banks
Several commercial banks in China have recently announced to dive into the home rental market, with observers reckoning they may bring radical changes to the sector that has embraced several rounds of policy incentives since this year.

The banks are joining hands with either real estate developers or local governments to provide financial and technical support for the burgeoning business, the Caijing Magazine reported. For example, CITIC Bank has provided Country Garden Group a funding of 30 billion yuan to guarantee its long-term rental apartment projects, while China Construction Bank is collaborating with the local governments in South China's Guangdong province to construct the first-ever official home rental platform.

Impact of banks

“With banks getting involved, the sector would be transformed,” an industry insider told the Beijing Youth Daily on condition of anonymity. “Banks are braving into the market, and they will bring dramatic changes. In the future, long-term rental apartments would be dominated by banks, large state-owned enterprises, real estate giants and major property agencies and the share for small businesses would continue to diminish,” he said, noting although the market may risk being monopolized, it would definitely become more regulated.

On October 30, China CITIC Bank spearheaded business cooperation with real estate developers to provide Country Garden Group a funding of 30 billion yuan to provide coverage for its long-term apartment construction, and operation in the coming three years.

On November 2, China Construction Bank signed strategic agreements with Guangdong provincial government and Foshan local government to construct a platform for regulating local rental markets and provide insurance policies for rental transactions in the future five years. It is specified by the agreements that the bank would lend out 200 billion yuan to develop rental housing projects in Foshan, a city in southeastern China's Guangdong province.

Over many years, the filing system for rental housing has failed to be implemented and information about tenants mostly failed to be put on record. Now, after both the banks and governments are on board for the business, the rental-on-credit mode may finally become feasible thanks to banking system's database of credit records,” Wang Mengwen, analyst with the E-house China R&D Institute, told the Caijing Magazine.

A China Construction Bank manager in charge of the matter disclosed the bank would also construct a financial platform to combine online and offline services through mobile phone APP and banking outlets.

When asked about how they're going to guarantee authenticity of rental housing on the platforms, the bank manager said they would cooperate with major apartment leasing agencies to verify all information uploaded about scattered apartments owned by individual landlords through online procedures and offline field investigation.

“Till now, we've developed 20 financial products (loans) for rental business,” he said. For young people who just graduated from college, rent payment could be quite a financial burden, and bank loans would help them make the payments.

Li Zhongdong, vice principal of the bank's Shenzhen branch introduced a financial product targeting young tenants. “The loan is used for paying rent and related expenses on a one-off basis. Based on credit records of borrowers, the longest lending period would be 10 years while the largest loan amount amounts to 1 million yuan. In order to encourage long-term rental transactions, the bank would also offer favorable lending rates.

Rental housing to curb speculation

Rental housing has been defined by the government as indispensable to China's residential housing sector. And industry insiders believe the governmental policy—to boost home rental markets through various incentives and granting tenants equal public services rights—would stay for a long period and effectively help prevent irrational home-buying craze and curtail speculation in country's overheated housing market.

Besides the mostly advocated long-term rental apartments, public rental housing also constitutes a big part of the growing market. The Ministry of Land and Resources and Ministry of Housing have recently announced to develop rental housing projects on collectively owned land. It was reported by the Beijing Youth Daily earlier the capital city has finished three projects for 5,600 flats. By the end of this year, another 12,800 flats would be rented to tenants.

Thanks to the new home rental policy in Beijing, tenants with Beijing Hukou could have their children schooled in the area where they rent a house. Mr. Liu, who is employed by Tencent, China's Internet giant, had planned to purchase a flat in Beijing but prices have gone beyond his family's financial means.

However, he has recently changed his idea to buy a house in the city. Instead, he told the Beijing Youth Daily that he's now applying for a public rental house. “The new policy grants schooling rights. In this case, there is no need to purchase such expensive homes,” he said.

On July 21, nine governmental agencies including the Ministry of Housing and Urban-Rural Development and National Development and Reform Commission (NDRC) issued joint statements, vowing to speed up the development of home rental markets in popular cities for migrants.

Industry analysts mostly reckon the sector will be bullish on development prospects. Based on estimate made by the Oriental Securities, by 2030, 270 million Chinese would be renting homes with the overall size of the market amounting to 4.2 trillion yuan.

Based on the latest data of Centaline Property Agency, over 50 mainland Chinese cities have announced policies to restrict home sales and develop rental market this year, and over 10 cities have earmarked land for rental housing projects. It is expected that over 80,000 rental apartments will get into the markets of mainly first-tier cities like Beijing and Shanghai.

Zhang Dawei, marketing director of Centaline Property Agency was quoted as saying the top challenge for the market would be tight supply. Financing channels must help to increase the supply of rental housing. Meanwhile, he suggested the most effective and direct policy would be to increase land supply earmarked for developing rental housing, especially in first-tier cities like Beijing and Shanghai.   


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