China’s private builders face $553 billion gap to complete homes - Hindustan Times
close_game
close_game

China’s private builders face $553 billion gap to complete homes

Bloomberg |
Apr 15, 2024 09:23 AM IST

Chinese private real estate developers face a $553 billion funding gap to complete pre-sold homes, adding to the woes of an industry

(Bloomberg) -- Chinese private developers face a $553 billion funding gap to complete pre-sold homes, adding to the woes of an industry that has yet to bottom out, according to a research report by Goldman Sachs Group Inc.

Chinese private developers face a $553 billion funding gap to complete pre-sold homes(Bloomberg)
Chinese private developers face a $553 billion funding gap to complete pre-sold homes(Bloomberg)

Credit support from banks — which totaled 469 billion yuan as of the end of March — “appears well below the amount needed for securing home completions,” analysts led by Lisheng Wang wrote in a report released Sunday.

Unlock exclusive access to the latest news on India's general elections, only on the HT App. Download Now! Download Now!

As China’s real estate crisis continues, the impact of property easing measures from last year are fading in the new homes market, according to the report. Many metrics tracking the industry continue to worsen, and developers’ funding conditions remain stretched. Plus, compared with previous major housing cycles, the magnitude of policy actions “appears small,” the analysts added.

Also Read: Can Indian real estate market face a crisis like China's Evergrande?

“The housing sector has not yet reached the bottom of the L-shaped path we expect,” they wrote.

To improve the situation, the government needs to boost developer funding conditions and bring housing demand to “normal levels,” the analysts said. Policymakers should also aim to mitigate a contraction in real estate construction.

However, Goldman’s calculations show that large-scale government plans in those three areas will incur “substantial costs,” well above the funding arrangements available thus far.

Also Read: Chinese cities further ease homebuying policies to spur real estate sales

China is still facing an oversupply in housing especially in smaller cities. Based on the assumption that local governments and state companies can purchase inventory at 50% of market prices, lowering the supply to 2018 levels would require 7.7 trillion yuan, according to the analysts.

Also Read: China home sales drought persists despite mounting support

The country plans to increase the share of public housing to at least 30% of the nation’s total housing stock from about 5% currently, according to a Wall Street Journal report, citing people close to policymaking. Looking at only the largest cities — known as tier-1 and tier-2 cities — the cost would be 4 trillion to 6 trillion yuan, according to the Goldman report.

©2024 Bloomberg L.P.

Tell us what your First Vote will stand for in a short video & get a chance to be featured on HT’s social media handles. Click here to know more!

Get Current Updates on India News, Elections 2024, Lok sabha election 2024 voting live , Karnataka election 2024 live in Bengaluru , Election 2024 Date along with Latest News and Top Headlines from India and around the world.
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Tuesday, May 28, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On