Chinese City to Finish Stalled Projects After Mortgage Boycott

Officials in the Chinese city of Zhengzhou, on the Yangtze River in central Henan province, have vowed to start building all stalled housing projects within 30 days.

The news follows protests that led to a mortgage boycott in at least 80 cities over developers failing to complete housing projects.

Zhengzhou, which has a population of about 13 million, will use special loan funding and is asking developers to return misappropriated funds. Sources said officials are also encouraging some real estate firms to file for bankruptcy.

“The goal is to achieve sustained construction on all suspended property projects in Zhengzhou by October 6,” a government notice dated Tuesday said.

Real estate firms must pledge valid assets to local government-backed financing companies if they want to get the special loans, one source cited the notice as saying.

ALSO SEE: China State Firms Buy Out $1bn Evergrande Stake in Bank

Homebuyers in at least 80 cities have threatened to halt making mortgage payments since late June because developers stopped building projects due to strapped liquidity after the government implemented its tough ‘three red lines’ policy or strict Covid-19 restrictions.

The mortgage boycott has added to worries about a prolonged slump in China’s property market, which has lurched from crisis to crisis since the summer of 2020 after regulators stepped in to cut excess leverage.

Some developers are encouraged to apply to the court for bankruptcy to ensure that the disposal of insolvent property developments is completed as soon as possible, one source cited the notice as saying.

“It’s good, but the move will save housing projects, not the developers.”

Real estate firms should do everything possible to ensure project delivery, by raising funds through disposal of undeveloped lands, assets and equities, and returning misappropriated funds, according to the notice.

Zhengzhou government didn’t immediately respond to a request for comments.

Local governments, including the central province of Hubei, have taken steps to prop up the property market by setting up local bailout funds.

Zhengzhou was one of the first cities to do so, setting up a bailout fund worth 10 billion yuan ($1.43 billion) in July.

The city government has proposed ways to several big developers to resolve the unfinished-home issue, including through loans, mergers and acquisitions, as well as turning the projects into subsidised rental housing, local media have reported.