HSBC, ICBC (Asia) and other Hong Kong banks stop mortgage loans for Evergrande’s unfinished flats over developer’s debt woes

The banks are continuing to offer loans for finished flats, but restricting lending on unfinished properties, according to people familiar with the matter

Evergrande currently has two residential projects under construction in Hong Kong: Emerald Bay Phase Two in Tuen Mun and The Vertex in Cheung Sha Wan

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The 1,228-unit Emerald Bay phase two project is due to be completed in the third quarter of 2021. Photo: May Tse

Published: 7:28pm, 21 Jul 2021Updated: 11:56am, 15 Sep 2021

HSBC, Industrial and Commercial Bank of China (Asia) and other major banks in the city have stopped offering mortgage loans for unfinished flats built by heavily indebted property developer China Evergrande in Hong Kong, according to people familiar with the matter

The U-turn on mortgage lending by several banks came after a creditor in eastern China won a court order this month to freeze 132 million yuan (US$20 million) in assets held by the Shenzhen-based developer, raising additional concerns about its financial health. Evergrande, the world’s most indebted developer, said on Monday that it was considering “legal proceedings” over the freezing order.

The banks, which also include the Bank of East Asia, are continuing to offer loans for finished flats, but restricting lending on unfinished properties, according to the people, who were not authorised to discuss the matter publicly.

“Such a move is very rare. It is probably banks’ concern that the developer’s cash flow problem will increase lending risk,” said Raymond Chong, founder and chief executive at Starprop Agency.

In Hong Kong, Evergrande currently has two residential projects under construction: Emerald Bay Phase Two development in Tuen Mun and The Vertex in Cheung Sha Wan.

“Evergrande is moving forward with the projects on schedule and we will not comment on one or some particular banks’ act,” a spokeswoman said. “Some banks are still positive on accepting mortgages for presale homes and we believe the impact [on Evergrande’s projects] is minor. If any of our buyers come across banks that decline their mortgage application, we suggest buyers find other financial institutions.”

The developer would review affected buyers on a case-by-case basis and extend the transaction period for up to 60 days, she said.

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