CHINA announced some of its strongest moves yet to revive its property sector, encouraging local governments to buy real estate and relaxing mortgage rules as it seeks to boost a recovery in the world’s second-largest economy.

Beijing gave the green light to authorities to buy some residential projects and turn them into public housing. On Tuesday, the Housing and Urban-Rural Development Bureau of Lin’an District in Hangzhou, East China’s Zhejiang Province, announced that it would buy housing units totaling no more than 10,000 square meters and turn them into public rental housing. Similar plans were announced by Shaoxing and other cities, according to Chinese reports. Local governments will also be able to purchase land from struggling developers.

China’s central bank, the People’s Bank of China (PBoC), unveiled a 300 billion yuan (US$41.5 billion) relending fund to support such purchases from local state-owned enterprises at a press conference Friday, saying it would drive up to 500 billion yuan of bank lending. Earlier the PBoC lowered the minimum downpayment for first-time homebuyers from 20% to 15%, and said it would scrap minimum interest rates on mortgages.

Vice Premier He Lifeng said: “In cities with a high inventory of commercial housing, the government may need to consider purchasing some of it at reasonable prices to be used as affordable housing.”

Beijing has so far mainly emphasized the need to complete unfinished projects, which homebuyers often purchase from developers in advance.

The Hang Seng Mainland Properties index in Hong Kong was up 5.3% against a rise of 0.9% for the benchmark Hang Seng index after the announcement. In the A share market, leading developers Vanke and Poly rose more than 10% to the daily trading limit.

The measures came after the National Bureau of Statistics released figures showing further declines in the housing market in April. Property prices in the first-tier cities fell by 2.5% year on year.

(SD-Agencies)