The Chinese government has indicated additional economic support measures are forthcoming after taking initial steps to assist the struggling property sector by extending loan relief to developers, Invest-Gate reports.

Leading state-run financial publications reported on July 11, 2023, that more policies favorable to real estate, as well as initiatives to restore business confidence, are likely to be adopted soon.

Previously, financial regulators had put pressure on banks to ease lending terms for property firms, encouraging negotiations to prolong outstanding loans. In a joint statement on July 10, 2023, the People’s Bank of China and the National Financial Regulatory Administration said the goal is to guarantee construction is completed on homes already being built.

Some overdue loans will now get a one-year extension on repayment, the statement said. The more generous terms were originally supposed to apply only to loans due by late May 2023 under a 16-point plan publicized last year.

“The move implies regulators think it will take another year and a half for developers to return to normal fundraising and operations,” explained Liu Shui, research director at China Index Holdings Ltd. “It means the housing downturn and developer risks have been worse than anticipated.”

Loans payable through the end of 2024 make up around 30-40% of developers’ total debts, analysts pointed out. The measures could ease liquidity pressures on developers in the near term if enacted.

China’s real estate crisis is inhibiting the recovery of the world’s second-largest economy, raising expectations of additional government action to stimulate demand. Home sales resumed declining in June after a temporary rebound earlier this year, putting more pressure on heavily indebted developers.