Since last year, a number of mainland benchmark real estate companies have been in debt crisis, and their developments in many parts of the country are in bad shape. Many homeowners have paid millions of yuan (RMB) in advance for their homes, but the delivery of their homes is nowhere in sight, making it a long and difficult road for them to defend their rights.
The Communist Party of China (CPC) official media reported recently that the developer of the second phase of Yi Sheng Yu Zhong Huan in Pudong New Area is Shanghai Haidong Real Estate Co.
Recently, the doors of the sales office of the Yi Sheng Royal Central II project in Pudong New Area of Shanghai are closed, the land of the community road is exposed, the doors of the buildings have not yet been installed, the interior decoration of some houses has not yet been completed, and the whole project is in a state of suspension.
The owner Mr. Shen paid a down payment of more than 2.8 million yuan in the first half of 2019, and now, nearly four months have passed since the agreed delivery date.
Ms. Su, the owner, said that now the house delivery is far away, not only the mortgage has to be paid, the whole family also has to rent a room outside, the economic pressure is huge.
Sangsheng Hongye, once one of the top 100 real estate enterprises in China, has been in a liquidity crisis since 2019, with multiple problems such as collective debt collection by employees, large stagnation of national projects, and funds being regulated, and has gradually lost control of its companies due to multiple debt defaults.
The Huaxia Times reported in January this year that Sangsheng Hongye had filed for bankruptcy reorganization at that time. Some industry insiders pointed out that in the context of real estate finance deleveraging, the collapse of Sangsheng Hongye is inevitable.
As of January this year, Sangsheng Hongye has been an executee 33 times, with a total amount of 3.65 billion yuan; 38 times as an untrustworthy executee, according to the “Sky Eye Search” platform. Since 2021 alone, Sangsheng Hongye has been executed 11 times. On the day of the announcement of the bankruptcy reorganization application, Sangsheng Hongye was also listed as a defaulted executee for failing to fulfill its obligations according to the court notice, while the chairman of the company, Chen Jianming, has been restricted from high spending 51 times in a row.
Similar to Shanghai Pudong Royal Central II project rotten events have occurred in many places in the country. Since last year, Fusheng, Taihe, Huaxia Happiness, Xiexin and many other benchmark real estate companies have had debt crises, and their properties developed in many places across the country are rotting or facing the risk of rotting. Phenomena such as rotten property, delivery is far away and difficult to maintain rights are frequent in many places.
Mr. Wei, a Taiyuan citizen, bought a house of Taihe Jinzunfu at a price close to 16,000 yuan per square meter in 2018, and the delivery date originally scheduled for October 2020 was delayed to December 2020. “By December instead, there was even less of a timetable. Now the building I bought has not been topped out and there is no sign of construction starting.”
Recently, the sales office of Taiyuan Taihe Jinzunfu has been empty, and there is no sign of excavators and other machinery on the site. According to the staff, the news of the resumption of construction of the property has not been received.
Real estate enterprises misappropriation of prepayment into the industry “unspoken rules”
Cao Zhounan, chairman of Blue Green Twin Cities, said that most of the top-ranked companies in the real estate industry take high debt, aggressive expansion of the development model. This high leverage land development and construction and fast payback business model, it is easy to produce cash flow breakage risk. “Once the developer suffers a debt crisis, it often misappropriates the advance payment from the home buyer, and the final ‘bill’ is still the home buyer.”
A number of housing enterprises said that because of poor supervision, the misappropriation of prepayment by housing enterprises has become an industry unspoken rule. They revealed that although there has been a pre-sale funds supervision system, some projects, the prepayment did not enter the supervision account; some, although into the supervision account, but the developer arbitrarily withdrawn, used for other purposes, leading to the suspension of the project or even the property is rotten.
And the commodity house pre-sale funds supervision system is like a virtual set up. The person in charge of the second phase of Shanghai Pudong Royal Central project said that the lender Bohai Bank was not able to reasonably supervise the funds, which led to the misappropriation of the prepayment by Sangsheng Hongye and aggravated the project crisis.
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