(Yicai Global) Nov. 29 -- Chinese regulators are doing away with a 12-year ban on new share sales by property developers as part of a package of policies aimed at bolstering the flagging real estate market.

Developers will now be allowed to conduct refinancing on the capital markets through the private placements of new shares, mergers and acquisitions as well as overseas fundraising, the China Securities Regulatory Commission said in an article published online yesterday.

They will also be allowed to sell stock to buy property, raise funds for Hong Kong-listed subsidiaries and to float a new company formed from a merger, so long as the new firm is in the property industry.

This is the ‘third arrow’ in the government’s quiver, which has recently also made credit and bond financing easier for developers. Just last week the People’s Bank of China said it will issue USD28 billion in interest-free loans to support the property sector.

The funds raised can only be used to revive existing housing projects, purchase equity, repay debts and supplement working capital, the CSRC said. The funds cannot be used to buy land or develop new projects.

The new rules have been laid out in detail by the CSRC to ensure their effective implementation, an analyst said.

They promote the role of real estate investment trusts in reviving developers' existing assets, and encourage banks to organize private equity funds to handle property projects, he added.

Private equity fund managers can set up immovable property investment funds to invest in existing residential and commercial properties and infrastructure to help developers revive projects and explore a new business development model, the CSRC said. Equity financing activities can now be carried out both onshore and offshore.

Developers’ restructuring and refinancing applications have been on pause since October 2010 to rein in land speculation after some property companies deliberately left land to which they had acquired the rights idle, a senior real estate analyst at a brokerage firm told Yicai Global.

Editors: Tang Shihua, Kim Taylor