(Yicai Global) Sept. 24 -- In a bid to curtail land arbitrage, authorities in Chengdu have blocked access to credit lines for a former unit of CK Asset Holdings that failed to finish a project in the southwestern Chinese city for 16 years.
Local financial institutions are prohibited from offering loans or restructuring help to Hutchison Whampoa Properties Chengdu or its project companies, the finance bureau of Chengdu Hi-Tech Industrial Development Zone wrote in a document seen by Yicai Global. Its long-term misbehavior of hoarding land and housing has seriously affected the stable development of the local real estate market, the bureau said.
Intentionally extending project times enables property developers to make huge profits from surging land and house prices. Hutchison Whampoa Properties Chengdu won the project’s development rights in 2004, paying CNY2.1 billion (USD308 million) or CNY1,030 (USD151) per square meter. Prices in surrounding areas have since soared to over CNY20,000 (USD2,933) per sqm. The project's phase VII and VIII are still under construction, while sales of phase VI began four years ago.
"All development projects of the company are carried out in strict accordance with national laws and regulations, and there is no case of land hoarding," CK Asset, founded by billionaire Li Ka-shing, said in a statement yesterday.
The Hong Kong-based company added that it sold Hutchison Whampoa Properties Chengdu in July. CK Asset made HKD3.8 billion (USD491.7 million) by transferring the unit to two local developers for CNY7.8 billion, it said at the time.
The punishment targets the project's original owner and will not impact the new owners, an insider at Yuzhou Financial Holdings Group, one of the two buyers, told Chinese media outlets.
The Chengdu project is not the only sluggish scheme of CK Asset's over the past 10 years from which the company has garnered huge profits from land hoarding, according to insiders in the real estate sector.
Shares of CK Asset [HKG: 1113] closed little changed today, closing 0.3 percent lower at HKD38.40 (USD4.95) each. The benchmark Hang Seng Index lost 1.8 percent.
Editor: Tang Shihua, Emmi Laine