(Yicai Global) Aug. 26 -- Shares of KE Holdings slid even though the Chinese firm's real estate chains Lianjia and Ziroom said Beijing's tightening house leasing regulation should not affect them.
KE's stock price [NYSE: BEKE] was 1.4 percent down in after-hours trading after closing 1.4 percent lower in New York yesterday. The shares had declined more than 4.6 percent intraday yesterday.
Lianjia offers property brokerage services, not subletting, the affiliate of Beijing-based KE said in a statement on its WeChat account yesterday. The firm and Ziroom are two independent entities of KE, it added.
Ziroom has the right qualifications to operate a house leasing business, the property management company said to China Securities Journal.
First Leasing Law
On Aug. 24, Beijing’s housing regulator issued a draft bill that would become China's first property leasing law if implemented. The document proposes that property brokerages cannot offer leasing services as those that do need to obtain certain qualifications. The regulator invites feedback on the bill till Sept. 23.
After the document was released, market participants suspected that property brokers, including Lianjia and 5i5j Holding Group, could be adversely affected by it.
The proposed new rule is intended to standardize the property rental market, Beijing News reported today, citing Yan Yuejin, research director at E-House China Research and Development Institute. The bill has nothing to do with stopping leasing, Yan added.
Still, one company cannot fulfill the two functions. Real estate brokers can facilitate contract signing between property owners and tenants but they cannot take a cut from the rent every month, and that has been the general rule for long, Zhang Dawei, chief analyst at Centaline Property, said China Securities Journal yesterday.
However, leasing companies can directly sublet housing after signing a contract with the landlord, but they cannot charge agency commissions, Zhang added.
Editor: Emmi Laine, Xiao Yi