On February 8, 2022, the Chinese Bank of China and the Banking and Insurance Regulatory Commission issued the Notice on The Non-inclusion of Loans Related to Affordable Rental Housing in the Management of Real Estate Loan Concentration, which clarifies that loans related to affordable rental housing projects are not included in the management of real estate loan concentration, and encourages banking financial institutions to increase support for the development of affordable rental housing. The landing of this policy will have a positive effect on which housing enterprises? What changes will the development trend of the industry bring?
Affordable rental housing is not included in the centralized management
Guide housing enterprises to adjust their layout
Judging from the content of the Notice, it is clear that the loans related to affordable rental housing projects that hold the project identification certificate are not included in the management of real estate loan concentration, which is in line with the general tone of "no speculation in housing" and "rent-purchase at the same time". On January 20, 2022, the National Housing and Urban-Rural Construction Work Conference was held, and it was proposed to prepare 2.4 million units/room for affordable rental housing throughout the year. The further clarification of the central bank's policy effectively enhances the motivation of housing enterprises to apply for affordable rental housing loans; at the same time, banks issue relevant loans that are not subject to concentration management indicators, and there is sufficient space to increase credit for affordable rental housing projects, thereby accelerating the construction of affordable rental housing.
In fact, many banks have increased their credit support for the construction and operation of affordable rental housing, such as China Construction Bank, which is one of the earliest financial institutions in China to support the construction of affordable rental housing. By the end of 2021, the amount of credit granted by CCB has exceeded 100 billion yuan, and the amount invested has exceeded 43 billion yuan, involving more than 400 affordable rental housing projects. On January 26, 2022, CCB also signed a cooperation agreement with Poly Group to explore the full-life cycle business model of affordable rental housing from incubation and cultivation, construction and operation to the issuance of public REITs.
In addition to affordable rental housing loans, how to connect public REITs with affordable rental housing has also become the focus of recent local policies, such as January 19, 2022, Wuxi issued the "Implementation Opinions of the Municipal Government Office on Accelerating the Development of Affordable Rental Housing", which mentions supporting the construction, renovation and operation of affordable rental housing and the issuance of real estate investment trust funds (REITs) financing. It can be seen that under the future financing support of the multi-faceted field of affordable rental housing, housing enterprises will be guided to adjust the investment layout to a certain extent, and it is not excluded that some housing enterprises will take the initiative to actively exert efforts in affordable rental housing.
The identification procedure and business scale may benefit the housing enterprises to a limited extent
The exact effect remains to be seen
Housing enterprises should participate in the construction of affordable rental housing and enjoy the preferential treatment of relevant policies, first of all, they must clarify the definition of affordable rental housing items and obtain a certificate of recognition for affordable rental housing projects.
According to the Opinions of the General Office of the State Council on Accelerating the Development of Affordable Rental Housing, affordable rental housing mainly solves the housing difficulties of new citizens and young people, with a construction area of no more than 70 square meters of small units, and the rent is lower than the rent of rental housing in the same area and the same quality market. On January 18, 2022, Shanghai promulgated the Measures for the Identification of Affordable Rental Housing Projects (Trial Implementation), which further clarified the household type standards for the newly implemented affordable rental housing projects, that is, the proportion of the floor area of units under 70 square meters to the construction area of the project housing is not less than 70%.
According to the identification procedure of Shanghai affordable rental housing, housing enterprises can obtain relevant certifications through two methods: existing projects and newly implemented projects. Among them, existing projects refer to rental housing projects that have been completed or under construction (including those undergoing construction formalities) before the implementation of the Measures. Through this process, housing enterprises can transform the qualified rental housing projects they have obtained into affordable rental housing projects, and then enjoy policy preferences, but at the same time, the rent is also estimated to be about 15%-20% lower than the market price.
In the new implementation project identification procedure, it includes the general identification procedure and the simplified identification procedure. The simplified determination procedure is mainly applicable to commercial housing allocation and affordable rental housing projects, as well as new construction projects with (guaranteed) rental housing specified in the land transfer contract. The procedure involves more of the new supply of state-owned construction land in various places, such as Shanghai's requirement that the newly transferred commercial housing land be allocated to build no less than 15% of the self-sustaining guaranteed rental housing of the development enterprise. However, it should be noted that in this type of transfer method, the investment entity is mainly state-owned enterprises, and the participation of private enterprises is limited.
Overall, due to the recent introduction of the measures for the identification of affordable rental housing, and the scale of the identified projects actually owned by housing enterprises is not large, the policy benefits that can be received at present are relatively limited. In particular, private housing enterprises, in the field of affordable rental housing or mainly play a supplementary and auxiliary role in addition to state-owned enterprises and central enterprises, the specific effect of financial support in this field in the future remains to be seen.
Housing enterprises with strong construction and operation capabilities
You can actively try the layout of this field
Although the scale of housing enterprises participating in affordable rental housing is not large, there are still some housing enterprises that actively cooperate with the government to test the waters in this field. According to the two batches of "List of Replicable and Scalable Experiences in the Development of Affordable Rental Housing" issued by the Ministry of Housing and Urban-Rural Development in November 2021 and February 2022, a number of housing enterprises have participated in the construction of affordable rental housing through collective operation construction land, including Vanke Boyu, China Resources Youchao and Longhu Guanyu, and the participation methods include the establishment of joint venture companies, the operation after the whole lease, the entrusted operation management and so on.
Among them, such as the Beijing Chengshou Temple project, the village collective economic organization and Vanke set up a joint venture company as the main body of project operation, Vanke is responsible for all construction cost inputs and obtains the right to operate and benefit for 45 years after the completion of the project; different from land acquisition, Vanke only needs to invest in construction and development costs in the early stage, reducing the rent burden and expanding the scale of business.
In addition, under the boom of affordable rental housing, for housing enterprises with strong construction capabilities, such housing enterprises can provide relevant construction services for the government, such as Greentown Management, Zhongyuan Construction, etc.; in addition, for enterprises with outstanding rental housing operation and management capabilities, they can also actively participate in the later operation of affordable rental housing, such as Vanke Bo Apartment, Longhu Guanyu, Xuhui Lingyu and so on.
Overall, the adjustment of the concentration management of real estate loans has further guided the business layout direction of housing enterprises in the future. It is worth noting that in early 2022, the young customers who claimed to be the first share of long-term rental apartments have filed for bankruptcy, revealing that the profitability of market-oriented rental housing is still limited; while affordable rental housing, although it enjoys preferential policies, it is also in the stage of low profit due to low rent pricing. In this context, housing enterprises involved in affordable rental housing should do a good job of mental adjustment and prepare for the era of low profits in real estate. In addition, the large number of affordable rental housing will also squeeze market-oriented rental housing, and for housing enterprises that lay out market-oriented rental housing, it is even more necessary to do a good job in product differentiation and enhance their own operational capabilities.
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Article Source: Kerry