By Clare Jim

BEIJING/HONG KONG (Reuters) -China will set up a real estate fund to help developers resolve a crippling debt crisis, aiming for a warchest of up to 300 billion yuan ($44.4 billion), according to a state bank official with direct knowledge of the matter.

The size of the fund would initially be set at 80 billion yuan through support from China Construction Bank and the People’s Bank of China (PBOC), the person, who declined to be identified due to the sensitivity of the matter, told Reuters.

If the model works, other banks will follow suit with a target to raise up to 200 to 300 billion yuan, he added.

The source said the fund will be used to bankroll the purchases of unfinished home projects and complete their construction, and then rent them to individuals as part of the government’s drive to boost rental housing.

Reuters has reached out for comment from China Construction Bank, the PBOC and China’s cabinet, the State Council.

The latest news propelled the Hang Seng Mainland Properties Index more than 5% early on Monday, and it was up 3.4% at midday. The CSI 300 Real Estate Index rose almost 2.0%.

The property market debt crisis has been a major drag on the economy over the past year, prompting authorities to offer a variety of support measures to stabilise the sector.

Financial information provider REDD first reported details of the real estate fund on Monday.

The fund would support more than a dozen property developers, including embattled China Evergrande Group, REDD reported, citing unidentified sources.

The fund has secured 50 billion yuan from China Construction Bank and a 30 billion yuan relending facility from the People’s Bank of China (PBOC), the report said, adding it could be upsized to between 200 to 300 billion yuan.

Regulators and local governments would select the developers eligible for support from the fund, REDD said, adding that the fund could be used to buy financial products issued by the developers or finance state buyers’ acquisitions of their projects.

Beijing is also considering a national policy for issuance of special bonds for shantytown redevelopment, the report said.

($1 = 6.7553 Chinese yuan renminbi)

(Reporting by Clare Jim in Hong Kong, additional reporting by Kevin Huang in Beijing.Editing by Anne Marie Roantree and Shri Navaratnam)