SHENZHEN’S financial regulator has recently issued a notice on strengthening the verification of fund sources for commercial housing land purchase, in which specific supervisory requirements have been raised for both real estate developers and financial institutions.

The move aims to beef up land purchase supervision and financing of real estate developers, Shenzhen Special Zone Daily reported yesterday.

According to the requirements, real estate developers’ shareholders must not illegally provide the companies with loans, on-lending, guarantees or other relevant financing as land purchase funds.

Meanwhile, real estate developers are prohibited from directly or indirectly using financial institutions’ various financing funds as land purchase funds.

Real estate developers’ land purchase funds must not use the loans or prepayments of industrial chain upstream and downstream enterprises, loans of other natural persons, legal persons and unincorporated organizations, and the developer-controlled financing of non-real estate enterprises.

Real estate developers are also required to explain their land purchase fund sources, promise to use its own funds, provide corresponding proof, make commitments and submit audit reports provided by accounting firms.

Those who violate the rules will have their deposit for land bidding confiscated and will be banned from bidding at land auctions for a year.

Licensed financial institutions such as banks, securities, insurance, futures, trusts, funds and asset management companies, as well as local financial institutions like commercial factoring companies are required not to illegally provide various financing funds for real estate developers as land purchase funds.

Some analysts said that the notice has put real estate developers under tighter scrutiny, as it further standardizes their land purchase fund sources. On the other hand, this will help strengthen financially sound large real estate developers’ competitiveness.  

(Zhang Yu)