Big lender in China offers to finance downpayments as housing market slumps

BEIJING - One of China's biggest financial firms is offering to lend money to home buyers for down payments, a move that could help the slumping housing market but adds to the debt risks faced by the nation's lenders, the Wall Street Journal reported.

A real-estate subsidiary of Ping An Insurance (Group) Co., one of China's largest insurers and a financial conglomerate, last month opened a financing service for buyers at 121 residential property projects across the country, built by developers that include Shimao Property Holdings and Greenland Holding Group, the Journal said in its online edition.

Subsidies from Ping An and the developer, as well as collateral from the borrower, can reduce the down-payment loan rates to as low as zero, the newspaper said.

Homebuyers in China are required to put down a deposit of at least 30 per cent for a first property and 60 per cent for subsequent purchases but smaller developers have been known to bend the rules by offering to finance down payments.

Ping An, though, is the first big Chinese company to do so.

Some local governments, including the southern Chinese cities of Shenzhen and Guangzhou, have issued notices warning that such practices violate the central bank's requirements on down payments, said the paper.

Ping An's move comes come as China's housing market continues to weaken, with sales down 10.9 per cent in the first eight months of the year, said the Journal.

Some economists have warned that China's moribund property sector is the biggest threat to its economic growth.