China clamps down on risks in rental housing market

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China will curb financial risks in the rental housing market by tightening lending to rental housing companies and capping the ratio of their rental income from loans taken by tenants at 30%, the housing ministry said on Wednesday.

Residential apartments are located in downtown Shenzhen, China April 26, 2017. Picture taken April 26, 2017.

The ministry described the sector’s development as “chaotic”, saying it had been filled with false listing information and malicious practices such as misuse of loans, illegal withholding of security deposits and forced evictions. To prevent financial risks, regulators will “make clear requirements on the term and size of the loans for the rental housing business” and strengthen the supervision of rental companies with risky business models, such as paying homeowners more than the eventual rental price to gain market share.

While rental housing companies can apply for loans with their account receivables, which are rents, the term of the loans should be based on the leasing contracts and match the leasing period, it said.

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