Evergrande vows to restart 38 stalled property projects by month’s end to defuse China’s mortgage boycott
- Evergrande will restart construction on 38 developments by September 30, it said in a statement late Monday, citing Chairman Hui Ka-yan’s weekly staff meeting
- It has already resumed building on 668 of the total 706 projects, it said
The company will restart construction on 38 developments by September 30, it said in a statement late Monday, citing Chairman Hui Ka-yan’s weekly staff meeting. It has already resumed building on 668 of the total 706 projects, it said.
It’s been difficult to assess the scale of the mortgage boycotts since the government in July began censoring crowdsourced documents circulated online. The trend has raised concern that the property crisis could spread to the financial system. Banks face mortgage losses of US$350 billion in a worst-case scenario, S&P Global Ratings has estimated, although lenders posted much smaller overdue loans in the most recent earnings season.
Chinese authorities are taking steps to ensure real estate companies finish apartments. In Zhengzhou city in Henan province, all stalled developments must resume by October 6, the Communist Party-run Dahe News reported last week.
The local government is urging builders to raise funds by selling undeveloped land and other assets, according to the report. Financing platforms set up by the local authorities will take over projects of developers who have liquidity difficulties.
The central government has also been taking steps to address the issue. Authorities will offer 200 billion yuan (US$29 billion) in special loans to ensure stalled housing projects are delivered to buyers, people familiar with the matter said last month.
In addition, policymakers are making it easier for some developers to raise funds on the local bond market. Several private real estate companies have issued or planned to issue new domestic bonds with state-owned China Bond Insurance providing full guarantees.
Developers like Country Garden Real Estate Group, which plans to sell as much as 1.5 billion yuan of onshore bonds, listed funding of property projects among their use of proceeds. Last week, Seazen Holdings sold 1 billion yuan of three-year notes at a 3.28 per cent yield. The bond, which is guaranteed by China Bond Insurance, was 2.8 times oversubscribed.
Yet Evergrande, which defaulted on its offshore debt in December, has not been able to tap the domestic bond guarantee programme and its statement did not say how it was funding the revived construction work.
The company is actively applying for special purpose loans and trying to receive support fund money for distressed developers, 21st Century Business Herald reported last week, citing an interview with Chief Executive Officer Shawn Siu. It is working with state-backed construction companies in Chongqing and Hefei.
Evergrande is working on an offshore debt restructuring plan, which it aims to announce within this year. It failed to deliver a preliminary plan in July as previously promised.