FILE PHOTO: FILE PHOTO: A man rides a bicycle next to a construction site near residential buildings in Beijing, China, January 13, 2021. Picture taken January 13, 2021. REUTERS/Tingshu Wang/File Photo/File Photo

BEIJING (Reuters) – Beijing may tighten the management of home purchase payments held in escrow accounts to ensure the funds are used for property projects only, according to draft guidelines issued on Thursday.

A debt crisis at China Evergrande Group, once the nation’s top-selling developer, has rocked the sector which is facing a liquidity crunch.

Chinese developers can sell residential projects before construction, but are required to put funds in escrow bank accounts monitored by local regulators.

Under the proposed new rules, developers would not be allowed to get the funds back if their projects have quality problems, are not delivered on schedule, or violate laws.

Home buyers would not be permitted to sign a contract with the developer until they have put the entire deposit into escrow bank accounts, according to the draft rules published on the website of Beijing’s local housing regulator.

Growth in China’s property market is slowing down this year as tough measures including lending curbs, property price caps and land sales restrictions, cooled the sector.

Chinese property developer Kaisa Group Holdings Ltd said on Thursday its finance unit had missed a payment on a wealth management product (WMP), adding to worries about a cash crunch at the debt-strapped company.

Reporting by Liangping Gao and Ryan Woo, Editing by Alexandra Hudson

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