China has asked banks to provide more credit to the country's struggling construction companies, due to the growing number of homeowners refusing to pay the installment of their properties, worsening the liquidity crisis in the sector.

Owners of homes in China whose work was left unfinished due to the precarious situation of the builders are refusing to pay the installments of the properties, industry sources said.

"The list [of affected projects] has doubled in the last three days," analysts at US investment bank Jefferies pointed out in a report, estimating a shortfall for construction companies at 388 billion yuan (57.5 billion euros).

Pre-sales are the most common way in China to sell real estate.

The refusal to pay the installments is particularly worrying, because it also threatens the financial system.

The regulator urged banks on Sunday to "meet the reasonable funding needs of real estate businesses."

It is essential "to do good customer service [...] to honor contracts, fulfill commitments and protect the legitimate rights and interests of buyers," the banking and insurance regulator stressed, quoted by state media.

Real estate and construction weigh more than a quarter in China's GDP (Gross Domestic Product) and have been an important driver of the country's economic growth over the past two decades.

To reduce leverage levels in the sector, last year Chinese regulators began requiring construction companies to cap the ratio of liabilities to assets at 70% and to cap net debt to assets at 100%, prompting a liquidity crisis in the sector.

In recent months, the construction companies Sunac and Shimao have become the most recent Chinese companies to default. The most emblematic case involves the Evergrande Group, whose liabilities exceed Portugal's Gross Domestic Product (GDP).

The crisis at Evergrande, China's largest builder, is indirectly penalizing its competitors, with buyers becoming increasingly reluctant to invest in real estate.

The uncertainties linked to covid-19, which weigh on household incomes, are also affecting the sector.

The real estate crisis has strong implications for the country's middle class. Faced with a tight capital market, the sector concentrates a huge portion of the wealth of Chinese families - about 70%, according to different estimates.