Longfor Group said its 1.5 billion yuan ($219 million) bonds had been priced at a coupon rate of 3.3%, marking the first sale by a private Chinese homebuilder of notes fully guaranteed by the state to boost market sentiment amid a sector-wide cash crunch.

Beijing has stepped up support for the property sector on worries that a deepening debt crisis and defaults could impact property developers regarded as financially sound.

Longfor's three-year notes, priced at the lower end of an indicative range of 3% to 4.3%, were oversubscribed by 2.86 times, the company and market sources said. The offering was guaranteed by state-owned China Bond Insurance Co Ltd.

"It shows debt guarantee and credit enhancement is an important element for bond issuance now," said Yan Yuejin, research director of E-House China R&D Institute. "Other property developers will become more active to issue bond."

According to data by China Central Depositary & Clearing Co, the median yield for AAA-rated property bonds that mature in three years is at 2.6416%.

CIFI Holdings, Longfor's smaller Shanghai-based peer, is also planning to sell 1 billion to 1.5 billion yuan of three-year medium-term notes in September at a coupon rate of 3%-4.5%, according to a term sheet seen by Reuters.

The bonds will also be guaranteed by China Bond Insurance, and the proceeds will be used for project development and debt repayments, the term sheet shows.

CIFI did not immediately respond to a request for comment.

Chinese regulators have instructed China Bond Insurance to provide guarantees for onshore bond issuance by a few private property developers, Reuters reported last week.

China Bond Insurance will provide "full amount, unconditional and irrevocable joint liability guarantee" to these bonds. The guarantee provides more protection than credit risk management tools, market participants have said.

But some of China's state-backed financial institutions are pushing back on Beijing's calls to support the embattled sector on worries it could hurt their balance sheets.

Despite the state guarantee, Longfor's cost to borrow was higher than for peers in recent issuances.

State-owned Poly Developments and Holdings' five-year bonds, callable after three years, were priced at 2.8% this week, while Shenzhen-based China Vanke issued a 2 billion yuan three-year green bond at 2.9% earlier this month.

($1 = 6.8559 Chinese yuan)