Real estate, one of the pillars underpinning the world's second largest economy, has been a focus of the Chinese Government's macroeconomic policy. As part of the latest efforts to shore up this sector, the authorities unveiled a package of supportive measures on May 17. These include lowering the minimum down payments home buyers need to secure a loan and cutting mortgage rates.

Over the past two decades, the property market has been one of the major drivers of China's economic growth. However, the investment frenzy, accompanied by high levels of debt, led to mounting risks. An array of policies aimed at curbing speculation, such as restricting second home purchases and regulating property industry financing, were introduced. These policies helped cool the market. At the same time, with tighter financing rules in place, coupled with shrinking demand, some developers have suffered debt crises, resulting in their inability to deliver presold homes.

At a May 17 press conference, the Ministry of Housing and Urban-Rural Development vowed to deal with the risk of unfinished commercial housing. It also called for promoting presold home deliveries, reducing housing inventories and improving financing for developers.

China has established a coordinated financing mechanism to help cash-strained developers finish their projects. Local governments have taken steps to unleash housing demand. For instance, Hangzhou in Zhejiang Province, a technological hub that houses the headquarters of e-commerce giant Alibaba, has lifted all restrictions on housing purchases. Beijing, for its part, has chosen to partly relax curbs.

Given ongoing urbanization and families' need to improve housing conditions, China's property market still has potential for development. However, shifting supply-demand dynamics have necessitated a new real estate development model. Under this new model, emphasis will be placed on government-subsidized affordable housing to address the needs of low-income groups and the renovation of urban villages, rural communities that have become part of cities due to urban sprawl.

To destock commercial housing projects struggling with sales, state-owned enterprises are being encouraged to buy commercial homes and turn them into government-subsidized housing. The People's Bank of China has announced a plan to establish a 300-billion-yuan ($42.25 billion) central bank lending facility for this project.

Following ups and downs, China's real estate sector looks poised to embrace more sustainable and inclusive development.