China’s Efforts to Convert Unsold Homes into Affordable Housing Face Challenges

Analysts and developers express doubts over China’s initiative to address massive inventory by repurposing unsold homes into affordable housing, citing concerns about the program’s scope and potential impact on cash-strapped developers.

In response to the property sector crisis, Beijing introduced a 300 billion yuan ($41 billion) lending facility plan last month. This initiative could lead to 500 billion yuan in bank financing for local state-owned enterprises (SOEs) to acquire completed yet unsold homes.

The program involves Chinese banks providing cheaper loans to SOEs, supported by the central bank, to purchase homes from developers at “reasonable prices” for conversion into affordable housing. However, private developers raise concerns about limited selection opportunities, inadequate funding, while the scheme is anticipated to debut solely in major cities where affordable housing options exist.

The tepid response from developers poses a challenge for Beijing, as previous support measures have failed to revive the property sector, which was once a significant contributor to GDP and now a key economic burden.

Despite ongoing efforts to stimulate the real estate market, concerns persist about the effectiveness of the program in addressing inventory challenges and supporting struggling developers amid the industry downturn.