China to Use Regional Bonds to Purchase Idle Land for Affordable Housing Amid Property Crisis

China plans to use regional bonds to buy idle land from property developers to build affordable housing. This comes amid a severe dip in the property sector. The move seeks to provide financial relief and effectively use land, but there are concerns about its potential financial impact.

The Chinese government is turning to regional bonds to finance the acquisition of idle land from financially struggling property developers, aiming to convert these plots into affordable housing, according to a report by Nikkei Asia. This initiative comes as the Chinese property market continues to suffer from a significant downturn.

Initially introduced in 2015, these special-purpose bonds were meant to fund infrastructure projects like economic zones and roads. Now, the proceeds will also target undeveloped land and unfinished buildings, aiding real estate developers grappling with a steep market decline. The country's new-home sales in terms of area plummeted by 22 percent in the first half of this year, according to the National Bureau of Statistics.

Amid this economic backdrop, the Chinese government aims to support struggling real estate developers and promote optimal land use. Despite a recent borrowing program encouraging local governments to purchase unsold housing stock, progress has been limited. Experts, however, caution that if this new affordable housing strategy fails to generate income, it could exacerbate China's financial woes.

Adding to the challenges, revenue from sales of use rights to state-owned land—a crucial income stream for local governments—has declined amid the real estate slump. Naoki Tsukioka from Mizuho Research and Technologies suggests that without substantial central government intervention or fiscal stimulus, the real estate sector's recovery remains uncertain.

(With inputs from agencies.)