Moody's: Tax won't affect Chinese developers

Moody's Investors Service said the enforcement of the land appreciation tax, which was recently announced by China's State Tax Bureau, will have no immediate rating impact on Chinese developers.

The agency said it expects that Chinese developers will have to service their accrued land appreciation tax payments in the near- to medium-term. Nevertheless, the amount in question is on average not more than 15% of each company's estimated year end cash balance, as most of the developers raised new funding last year, the agency said.

While the ongoing tax payment for future sales will lower property developers' operating cash flow, such additional payment is estimated to be about 5% of cash property sales per year. The resulting weakened cash flow metrics remain appropriate for their current rating levels, Moody's said.

Moody's has rated seven property developers in China, including China Overseas Land and Investment Ltd., rated Baa3 with stable outlook, Shimao Properties Holdings Ltd., rated Baa3 with stable outlook, Greentown China Holdings Ltd. rated Ba2 with stable outlook, Hopson Development Holdings Ltd., rated Ba2 with stable outlook, Agile Property Holdings Ltd., rated Ba3 with stable outlook, Shanghai Real Estate Ltd., rated B1 with stable outlook and HKI Properties Ltd., rated provisional B2 with stable outlook.

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