China property developers shares up on reports they may have more access to funds

Shares of Chinese property developers climbed on Friday, following media reports that the sector is gaining easier access to presale proceeds from residential projects - the latest move by authorities to ease the industry's severe cash crunch.

Regulatory curbs on borrowing have driven China's property sector into a liquidity crisis, highlighted by Evergrande, the world's most indebted property firm. The contagion has engulfed other developers and contributed to a sharp slump in China's property market, which accounts for a quarter of its economy.

Cailianshe, an online provider of financial news, said late on Thursday that authorities have issued new rules to correct any "over-tightening" of developers' escrow accounts that had happened at the city or county-level.

Developers now only need to keep funds in the escrow accounts determined by construction contract costs, the report said, allowing more flexibility for developers to withdraw funds.

The Hang Seng Mainland Properties Index closed up 2.2 per cent, versus a flat main Hang Seng Index.

Notable gainers included China Vanke, which jumped 4.9 per cent, and Guangzhou R&F Properties, which surged 7.3 per cent.

Chinese developers are allowed to sell residential projects before completing them, but are required to put those funds in escrow accounts. They can withdraw fund in stages depending on how much they have completed the project.

Cash held in escrow typically accounts for 50per cent of developers' pre-sale funds, developers and analysts said.

Reuters reported last month that China was drafting nationwide rules to make it easier for property developers to access pre-sale funds held in escrow accounts.

The 21st Century Business Herald newspaper said the new national rules aim to standardize regulations on the escrow accounts as some cities had previously tightened to hold up all the funds of developers.