Property agency Worldunion growing its home loan business

Worldunion, the mainland's first listed property consultancy, aims for tenfold growth in its homebuyer loans to 1.5 billion yuan (HK$1.86 billion) this year.

It would be a major step in the company's efforts to broaden its sources of revenue as the mainland's once-bubbly real estate market cools down.

Chairman Chen Jinsong told the South China Morning Post there was strong demand from young couples to temporarily meet a shortfall of, say, 100,000 yuan in a down payment or the 50,000 yuan it would cost to decorate a new home.

A loan for such a purpose could often be covered by an annual bonus the following year.

"Chinese home buyers are the most creditworthy clients," Chen said. "We haven't seen any bad loans yet."

The company extends loans, 96 per cent of which involve a sum of 100,000 yuan, for one or two years at annual interest rates between 15 per cent and 20 per cent to buyers of first homes and upgraders.

The business has expanded quickly, and Chen said the agency was considering partnering private equity funds in the second half of this year and cooperating with other companies in the future to outsource fundraising and part of its risk.

The firm's decision to diversify into loan services came amid quickening government efforts to liberalise the nation's financial sector and a wide view in the property industry that the era of easy profits in the property market is over after a long boom in construction.

Some developers, including China Vanke, the world's largest homebuilder, have also begun forays into the banking sector.

Worldunion is considering a slew of other services, including consulting in elderly care. It is also piggybacking on the business of developers venturing abroad.

Transaction volumes have fallen so far this year and will probably continue to do so in the second half.

Chen said the property market had entered a new downturn.

"We are at a tipping point now, but I don't think the market will collapse," he said.

He said the depth and the length of the downturn would depend on money market interest rates, which are normalising after a big surge when Alibaba Group's Yu E Bao online finance arm was first launched.

Worldunion will not expand to new mainland cities this year but will strengthen its penetration in key markets to increase its market share in the fragmented sector. Its main rivals include Centaline (China) and E-House (China).

"Quite a few agencies have come to ask us to acquire them," Chen said. "We will consider it … but will stay cautious this year."

In this week's C-Suite interview, Chen Jinsong talks about Worldunion's expansion plan and shares his view on the mainland property market.