In China, homebuyers occupy their unfinished “rotting” property

GUILIN, China (September 26) (Reuters) – Six months ago, Ms. Xu’s home was a room in a high-rise apartment in the southern Chinese city of Guilin she bought three years ago, drawn by brochures promoting her river views. and clean city air.

However, her living conditions are far from those promised: unpainted walls, potholes where electrical sockets should be, and no gas or running water. Every day she climbs up and down several flights of stairs carrying heavy water bottles filled with a hose outside.

“All of the family’s savings were invested in this house,” Chu, 55, told Reuters from the Xiulan County Compound, her room was empty except for a bed covered with mosquito nets, some necessities and empty bottles on the floor. She declined to give her full name, citing the sensitivity of the matter.

Xu and about 20 other buyers who live in the Xiulan County Mansion share a makeshift outdoor toilet and gather during the day at a table and benches in the central courtyard area.

They are part of a movement of homebuyers across China who have moved into what they call “rotten” apartments, either to pressure developers and authorities to complete them or out of financial necessity, as many cash-strapped builders have halted construction amid the country’s deep-seated real estate slump.

Shanghai E-House Real Estate Research Institute estimated in July that stalled projects accounted for 3.85% of China’s housing market in the first half of 2022, equivalent to an area of ​​231 million square meters.

While some local governments have taken steps to shore up the real estate market by setting up bailout funds, buyers like Shaw, who have paid deposits up front and are in trouble for mortgages, remain in limbo.

Mortgage strikes

The proliferation of unfinished apartments sparked an unprecedented mass insurrection, fueled by social media: In late June, thousands of homebuyers in at least 100 cities threatened to halt mortgage payments in protest of faltering construction.

Yan Yuejin, director of research at Shanghai E-House, said the overall real estate market is very sensitive to unfinished apartment cases because 90% of new homes purchased in China were bought “off-plan” while still under construction.

“If this issue is not resolved, it will affect real estate transactions, the government’s credibility, and may exacerbate developer debt problems,” he said.

A major downturn in China’s real estate sector, along with disruptions from strict measures to combat the Corona virus, is dragging the world’s second largest economy as the ruling Communist Party prepares to hold its five-yearly congress next month.

Falling out of Heaven

Xu bought her two-bedroom, 70-square-meter apartment in early 2019, about a year after its developer, Jiadengbao Real Estate, began construction and began marketing the apartments for around 6,000 yuan ($851) per square metre, which they said would come with facilities. Like underfloor heating and communal pool.

Work progressed quickly at first, as blocks in the planned 34 tower complex rose one by one.

But in June 2020, Jiadengbao Real Estate made headlines after a court accused the parent company of illegal fundraising and seized property worth 340 million yuan, including a number of apartments in the Xiulan County Mansion.

Construction halted in mid-2020, which Shaw discovered months later, describing her feelings at the time as “falling from heaven.”

Jiadengbao Real Estate did not respond to a Reuters request for comment.

Since the debt crisis erupted in 2021, thousands of homebuyers have fallen into similar predicaments as cash-strapped developers have gone bankrupt or abandoned distressed projects.

fence and growth

On a recent day, the main building of the buildings in the Xiulan County Palace was surrounded by a tall blue fence while the club, which was promoted with promotional materials, was covered with thick bushes. Cement mixers, iron pillars and piles of debris scattered around.

Shaw, who is unemployed, said she had bought the apartment for her only son, hoping he could raise a family there. She said her son and husband, who live far away in the northern province of Hebei, blame her for their financial plight, and no longer speak to her.

“We don’t know how long we will have to live here because the government hasn’t said anything official,” she said.

She hopes the Guilin government will step in to help.

The city government did not respond to a Reuters request for comment.

Housing authorities in Baoding, the northern city to which Xu belongs and whose parent company Jiadingbao Real Estate Company is registered, said last November that the city government and the Communist Party Committee had formed a group to solve the problem.

“If the government really wants to protect people’s livelihoods, and resume construction, we will go home,” Xu said.

(This story corrects the name of the expert in paragraph 9 of Eugene)

(dollar = 7.0508 Chinese yuan)

(cover) by Eduardo Baptista and Xiaoyu Yen; Reporting by Beijing Newsroom and Xihao Jiang; Lincoln Fest Editing.

Our criteria: Thomson Reuters Trust Principles.