Domestic property companies are turning to new funding options as bank loans become increasingly harder to obtain at a time when the government is tightening its monetary policies to rein in rising inflation.
"Domestic property companies still rely heavily on bank loans, which are difficult to get at a time when the government is pursuing a tightening policy," says Shuai Hu, an analyst at Haitong Securities in Shanghai.
Turning to the capital market for funding through IPOs and new share issues seems increasingly viable because of deepening investor apathy following the stock market crash which has brought the leading indicator down more than 50 percent since its peak in October.
Without the enormous interest income from over-subscriptions, issuers are finding the cost of IPOs unbearable relative to other funding sources.
For that reason, industry analysts and experts expect a sharp slowdown in new share issues by property companies in the second half of this year.
In the first six months of 2008, only two real estate companies had raised capital by issuing new shares for sale to the public.