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China Considers Buying Millions Of Unsold Homes To Save Property Market

China is considering a proposal to have local governments across the country buy millions of unsold homes, people familiar with the matter said, in what would be one of its most ambitious attempts yet to salvage the beleaguered property market.

The State Council is seeking feedback from several provinces and government entities on the preliminary plan, said the people, asking not to be identified discussing a private matter. While China has already experimented with several pilot programs to clear excess housing inventory with the help of state funding, the latest plan would be much larger in scale.

Local state-owned enterprises would be asked to help purchase unsold homes from distressed developers at steep discounts using loans provided by state banks, according to two of the people. Many of the properties would then be converted into affordable housing.

Officials are still debating details of the plan and its feasibility, the people said, adding that it could take months to be finalized if China’s leaders decide to go ahead. The housing ministry didn’t respond to a request for comment.

If authorities do proceed, it would mark a new phase in the government’s closely watched campaign to address the biggest drag on the world’s second-largest economy. China’s home sales plummeted about 47% in the first fourth months and unsold housing inventory is hovering at an eight-year high, exacerbating a meltdown that threatens to put about 5 million people at risk of unemployment or reduced incomes.

The plan can “inject liquidity to developers directly and improve their financial situation, as well as immediately digesting excess inventory,” said Raymond Cheng, head of China property research at CGS International Securities HK. “This is all win situation. Of course, it needs a lot of funds – at least 1 trillion yuan to make the impact more meaningful.”

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