High-quality property developers are always encouraged to raise funds through both initial public offerings or buying into listed companies, also known as back-door listings, to further expand their business, a senior official with China Securities Regulatory Commission has said.
He was clarifying earlier market speculation that regulatory approvals for such IPOs and additional public share sales have been stopped.
Meanwhile, IPO applications by property companies that intend to use the funds raised to buy yet-to-be-developed land will be rejected, and the securities watchdog will also ban IPO fund raising to hoard land and housing, Xi Longsheng, an official at CSRC's Department of Public Offering Supervision, told a conference in Beijing.
"There were concerns it might be difficult for domestic real estate developers to launch IPOs or sell additional shares but now it has been clarified officially," said Wei Bo, an industry analyst with Central China Securities Co.
China's real-estate market has been considered overheated for the past few years during which both land and home prices have been soaring.
Vital approach
While raising funds directly from the capital market has been widely agreed among industry experts as an important approach for real estate developers to boost their presence after tougher credit control policies were introduced, it is also sometimes blamed for continuously rising land and property prices.
"It seems that it did take rather longer time for real estate companies to get a green light for their financing applications, including both IPOs and additional share sales, from the CSRC since last September," said an industry insider. "But it is rather understandable as it could be viewed as one of the central government efforts to cool down the red-hot real estate market."
At the moment, financing applications by real estate companies are treated normally at CSRC, Xi said.
So far this year, two IPO plans submitted by property firms have been approved, and five are under review. And in terms of refinancing, four developers have successfully raised a total of 13.2 billion yuan (US$1.86 billion) from the domestic stock market. Three others have received nods and 15 more are now under the process.
About 120 real estate firms of the total of 50,000 nationwide, have issued yuan-denominated shares on the two stock exchanges on China's mainland, accounting for 7.5 percent of all A-share listed firms.