With China’s new home price gains rapidly evaporating and home sales slumping, Evergrande will have an even tougher time moving its inventory. As of 2020, 57% and 31% of its land acquisitions were in Tier-3 and weak Tier-2 cities, according to Bloomberg Intelligence. That’s because most of Evergrande’s projects are not prime real estate. To redeem its investors, apartments were offered at 28% discount to their market value, and parking lots were given away at a 52% discount, according to Caixin, the influential local financial media outlet. Evergrande’s latest settlement offer to investors in its wealth management projects showed us why: Its inventory quality is really poor. If only Evergrande could offload some of these projects to, say, a cash-rich state-owned enterprise, its immediate liquidity crunch would be resolved.īut there are few willing takers. This explains why, whenever faced with street protests from angry creditors, all Evergrande could offer was unsold apartments, store fronts and parking lots. Properties under development, in particular, ballooned to 1.3 trillion yuan ($202 billion), a 54% jump from three years ago. As of June, that inventory accounted for about 60% of its total assets. Growth in home prices and real-estate investment has slowed, while construction starts fell 3.2% in January-August, compared to a year earlier.īillionaire founder Hui Ka Yan’s biggest problem is that Evergrande’s working capital is tied to its inventory, composed largely of unfinished projects. and Guangzhou R&F Properties Co.īut economic data for August, released Wednesday, pointed to broader difficulties, with national home sales by value tumbling 19.7% year-over-year, the largest drop since April 2020. Credit markets are also pricing in significant default risks for some smaller rivals, such as Fantasia Holdings Group Co. The turmoil at Evergrande, which spans street protests as well as collapsing prices for its stock and bonds, is the most visible sign of the worsening climate for Chinese property developers. “Then they won’t be able to sell it on, either.”įu Linghui, a spokesperson for the NBS, said at a press conference that some property developers in China are facing challenges across their operations, though further observation is needed for impact on the development of the whole industry.įu also noted that operations of the domestic real estate industry remains generally stable as various regulators in many areas continued to stabilize housing prices, land prices as well as expectations under the principle of housing is for living not speculating “If they stop registering mortgages for their real estate, then anyone buying one of their homes won’t be able to get a mortgage,” an industry insider surnamed Li told RFA. Local authorities in the southern city of Foshan suspended mortgage registrations for at least nine Evergrande projects in the area, sparking fears that other local governments across China could follow suit.

Investors also gathered outside Evergrande offices in the eastern province of Jiangsu on Wednesday morning, with protests also reported in neighboring Anhui, and the central province of Hubei… The developer will also miss a principal payment on at least one loan next week, one of the people said. Evergrande is still discussing the possibility of getting extensions and rolling over some loans. 20, said the people, asking not to be identified discussing a private matter. The Ministry of Housing and Urban-Rural Development told banks in a meeting this week that Evergrande won’t be able to pay its debt obligations due on Sept. Chinese authorities have told major lenders to China Evergrande Group not to expect interest payments due next week on bank loans, according to people familiar with the matter, taking the cash-strapped developer a step closer to one of the nation’s biggest debt restructurings.

Evergrande defaults