What are the three red lines of real estate?

According to August 20th, the Ministry of Housing and Urban-Rural Development and the People's Bank of China held a symposium on key real estate enterprises in Beijing to study how to further implement the long-term real estate mechanism.

The meeting planned three red lines of real estate, 1, and the asset-liability ratio was greater than 70% after excluding the advance payment;

2. The net debt ratio is greater than100%;

3. The short-term cash debt ratio is less than 1 times.

The main contents of this meeting are summarized as follows: real estate is not regarded as a short-term means to stimulate the economy, and a long-term mechanism is implemented for real estate. We will improve the financial support policy system of the housing rental market and accelerate the formation of a housing system with both rent and purchase.

According to the different contact conditions of the "three red lines", the pilot real estate enterprises are divided into four grades: "red, orange, yellow and green". If the three red lines are hit, the developer's interest-bearing liabilities can no longer be increased; In the last two steps, the annual growth rate of interest-bearing liabilities shall not exceed 5%; Step one, the growth rate shall not exceed10%; One item is unqualified, not exceeding 15%. In other words, if all three items are successful, you can only wait for the capital chain to break and go bankrupt, two items can survive and one item can continue financing, but even if all three items are unsuccessful, the financing scale can only be within 15%.

When to implement 12 developers including Evergrande, Vanke and Country Garden are required to submit a three-year debt reduction plan before September. It is expected that the full implementation of the "three red lines" will start from 202 1. At the meeting with the developers on August 20th, the regulators made clear the fund monitoring and financing management rules of key real estate enterprises, which is another signal to take action against the developers. Pan, deputy governor of the Bank of China, said in mid-September that there would be a "reasonable transition period" to implement this policy.

What does this mean? This means that in the short term, a developer with a bad balance sheet and a lot of business in second-tier cities may need to cut prices to boost sales and replenish cash. This may also stimulate some real estate enterprises to sell shares or divest non-core businesses (such as property management services). In the long run, this may also force developers to invest more resources in non-residential real estate, such as office buildings and retail.