(Yicai) Nov. 30 -- Chinese real estate developers, which are struggling to raise funds amid a downturn in the sector, are becoming more upbeat as commercial banks enter into discussions with them now that regulators have set 'three minimum requirements' for loans to the property sector, according to an industry insider.

"Although the new measures have not been implemented yet, developers are more optimistic about financing prospects," the head of a private real estate company told Yicai yesterday. "I just finished a meeting with the head office of one bank and will meet another one soon,” he added.

The Three Minimum Requirements stipulate that a bank’s loans to the real estate sector should expand at a pace no less than the average growth rate of all loans to the property industry, according to a meeting held by the People’s Bank of China, the National Administration of Financial Regulation and the China Securities Regulatory Commission with lenders on Nov. 17.

They require that a bank’s loans to private real estate firms should increase at an equal or higher rate than all loans to the real estate sector, and that a bank’s personal mortgages to properties built by private developers should be no less than the average growth rate of all mortgages for individuals.

The new policy sets a lower limit for lenders’ financial support to private real estate developers, which will help them overcome difficulties in raising money and boost the sales of houses they build, TF Securities said in a research report.

Banks have responded cautiously to the new rules as they cannot lend money to developers that are unable to repay the loans, a corporate business manager at a bank in Shanghai told Yicai. Mechanisms should be formed before the new policy comes into force to ensure banks that comply with it are not held liable.

Banks still need to control their risk exposure while meeting the new requirements, think tank CRIC Research Center said in a report. Banks will probably stay prudent about granting loans to the real estate sector.

Lenders are studying how to implement the new policy, another banking insider said. While the new policy aims to help private developers, at the same time risks in the real estate sector should not spread to other industries.

Developers are struggling to raise funds. Last month, the amount raised by 80 developers halved from the same period last year to CNY21.4 billion (USD3 billion). And in the first 10 months, their fundraising sank 23.4 percent to CNY512.8 billion (USD72.6 billion), according to CRIC data.

Editors: Tang Shihua, Kim Taylor