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China to tighten rules for rental housing companies, strengthen supervision

China's housing ministry and other government entities will tighten rules on lending to rental housing companies and strengthen supervision of firms with risky business models in an effort to curb financial risks in the sector, Reuters reported.

The authorities will cap the ratio of rental income from loans taken by tenants at 30%, the outlet reported Dec. 25, citing a guidance posted on the ministry's website. They will also issue clear requirements on the term and size of the loans for rental housing businesses.

The authorities' move came as the rental housing sector has been troubled with false listing information and malicious practices, including the misuse of loans, illegal withholding of security deposits and forced evictions, according to the ministry.

The new guidance also require rental housing companies to set up capital supervision bank accounts for income from rents and deposits. Meanwhile, banks should monitor the use of loans and companies' ability to repay them. Rental housing companies are allowed to apply for loans with rental income but the term of such loans should be based on the leasing contracts and match the leasing period, the ministry said.