New subsidy set to boost housing mkt

China's new mortgage interest subsidy is quickly making its way to homebuyers, with banks stepping up efforts to ensure eligible borrowers can benefit, including customers whose mortgages were approved before the policy took effect but have yet to be disbursed.

Several banks have begun proactively contacting such customers and arranging supplemental agreements, while others are urging eligible borrowers to get in touch with their loan-handling branches.

China announced on Sept 29 that the country would implement the mortgage interest subsidy policy nationwide to reduce the interest burden on housing loans for families purchasing their first home.

On Oct 1, the first day the policy took effect, several branches of China Construction Bank in Sichuan province, including its branch in Shuangliu district of Chengdu and branches in Yibin and Nanchong, issued a total of 2.1 million yuan ($313,530) in subsidized mortgage loans to four homebuyers, covering both newly built commercial housing and second-hand homes.

During the first three days of the National Day holiday, the Guangdong provincial branch of Industrial and Commercial Bank of China accepted more than 100 mortgage applications that met the subsidy requirements, with the total loan amount exceeding 100 million yuan.

At present, China's six largest State-owned commercial banks, 12 nationwide joint-stock commercial banks and a number of major city commercial banks have announced that they will implement the mortgage interest subsidy policy and simplify the application process.

When applying for a mortgage, clients do not need to submit a separate application for the interest subsidy. The bank will preliminarily assess their eligibility based on factors such as the property's size, purchase price and whether it is a first-home purchase. The bank will then explain the subsidy rate, duration and amount, and obtain the client's authorization to process it.

Once the loan has been approved and confirmed as eligible, the subsidy will be automatically deducted from each monthly mortgage payment. Clients will be notified promptly through text messages, app notifications or other channels.

To qualify for support under the fiscal interest-subsidy policy, borrowers must meet three conditions: the loan must be a newly issued commercial personal housing loan used to purchase a first home, rather than to refinance or replace an existing loan; the purchased home must have a floor area of 120 square meters or less; and its purchase price must be no more than 1.5 million yuan.

The policy is scheduled to remain in effect for one year. During this period, for newly issued housing loans for eligible first-home purchases, the government will provide an interest subsidy equivalent to an annualized rate of 1 percentage point on the loan principal, for a period of up to five years. The maximum loan amount eligible for the subsidy is 1 million yuan per borrower.

According to estimates by the China Index Academy, from January through August, transactions for newly built homes in the 40 key cities that simultaneously met the requirements for the mortgage interest subsidy accounted for 33.1 percent of total new-home transactions.

Analysts said the policy is expected to benefit new-home markets in second-, third-, and fourth-tier cities more significantly, with properties aimed at first-time and basic housing needs likely to benefit the most.

Yan Yuejin, deputy head of the Shanghai-based E-house China R&D Institute, said that in the core areas of first-tier cities and some second-tier cities, the policy's direct stimulus effect is relatively limited.

Most homes priced at 1.5 million yuan or fewer are located in suburban or outer-suburban areas and tend to be smaller second-hand units. For first-tier cities, therefore, the policy is more of a supplementary measure to provide a floor for the market, Yan said.

jiangxueqing@chinadaily.com.cn