A Shenzhen-based real estate developer announced on Wednesday that it was not about to collapse, despite being beseiged by unhappy customers after failing to deliver homes which buyers had already paid for.
Shenzhen Guang Group Real Estate, which is said to be among China’s top 100 developers, was blacklisted twice in January by China’s supreme court for “violating property reporting rules,” and it admitted in a statement that it has failed to complete a new project in the city of Huizhou in Guangdong due to what the company described as financial pressures.
Despite the apparent breach of contract with its customers, and the increasing difficulty that property companies face in securing credit in China, the company said, “We’re confident in pulling through this hard time.”
Riot Police Called in as Protestors Beseige Developer’s Office
In recent days Chinese social media have carried pictures of hundreds of protestors gathering outside the company’s offices, while police in riot gear struggled to maintain order.
Guang Group said that it had produced a new schedule for existing buyers of homes in its Huizhou project, informing them of the revised completion date, and had made provisions for compensating its customers for the delay.
Local media reports have revealed that in addition to not delivering homes to customers who had bought off the plan, Guang Group has been pledging properties to builders and other suppliers in lieu of payment, due to a lack of cash.
Developers Squeezed by Slipping Sales and Scarce Credit
According to a recent report by Moody’s, for Q1 2014 total contracted sales in China’s residential property market declined 7.7% year-on-year to RMB1.1 trillion, and even the country’s largest developers reported poorer results for the period, with the industry averaging 5.6 percent less profit than last year.
The problem of poorer sales has been exacerbated by a scarcity of credit for a sector that relies on easy access to cash. Records from the People’s Bank of China show that new credit in China fell 19 percent in March compared to a year earlier, and money supply grew at the slowest pace on record.
Perhaps due to the usual optimism among property developers, in the announcement denying its demise, Guang also made know that it plans to begin marketing its high-end “Birds Resorts” projects in Huizhou, Dongguan and Weihai “in the near future.”