Chinese Real Estate Firms Going Bust This Year Are Mostly Small, Local Businesses
Ma Yifan
DATE:  Jul 23 2021
/ SOURCE:  Yicai
Chinese Real Estate Firms Going Bust This Year Are Mostly Small, Local Businesses Chinese Real Estate Firms Going Bust This Year Are Mostly Small, Local Businesses

(Yicai Global) July 23 -- Small, local businesses make up the bulk of the Chinese property companies that have gone bankrupt so far this year.

Some 203 had gone bust as of July 20, including a number of real estate brokerages and consultancies, according to court documents from across China seen by Yicai Global.

Of the 120 mainland-listed property firms, nearly 50 have published first-half earnings updates, with 21, mostly small and mid-sized businesses, warnings of losses, including Macrolink Culturaltainment Development and Langold Real Estate.

Smaller players are “trapped in a dilemma,” according to property think tank E&H Consulting. “To survive, they need to build. But by winning high-cost land bidding, they risk not being able to make a profit. Even breaking even is difficult.”

Some are taking drastic measures. Sundy Land Investment, a Hangzhou-based developer, recently returned a plot of land it secured the right to build on two months ago, after placing a winning bid of CNY1.8 billion (USD278 million), out of concern it could not make money on the deal.

Chinese authorities have been tightening supervision of the property sector, guided by the principle that ‘houses are for living in and not for speculative investment.’ That has favored large and mid-sized firms, according to E&H Consulting, which have increased their market share as they have more money and resources.

When the country’s top financial regulator decided to tighten the rules governing the sector in March to avoid a bubble, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said many people buy property as an investment rather than to live in.

Facing pressure on three fronts -- land use rights acquisition, operations and financing -- small and medium-sized property firms should look at new opportunities to survive in the post-pandemic era, said Yan Yuejin, research director at E-House Real Estate Research Institute's Think Tank Center.

E&H Consulting believes they should focus on operational efficiency and avoid blindly following the trend of business diversification.

Editors: Zhang Yushuo, Futura Costaglione

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Keywords:   Property Developer,Bankruptcy