Following media reports that Country Garden would give refunds to Forest City buyers caught up in China’s recent capital control measures, the Guangzhou-based developer has announced that buyers cancelling their purchases at the project in Malaysia’s Iskandar area would be liable for penalties, according to an account in Singapore’s Straits Times, citing a statement from the Hong Kong-listed firm.
“We would […] like to clarify that cancellation after a sales and purchase agreement has been signed is deemed as a breach of contract,” Country Garden was quoted as saying in the statement. The company indicated those hoping to get out of their contracts for homes in the $100 billion project would pay penalties “ranging between 10 per cent and 30 per cent,” should they default on their payments or attempt to cancel the agreement.
The developer’s statement comes after many mainland investors who had signed up to purchase homes in the 1400-hectare project just across the border from Singapore had found their attempts to make payments on their tropical dream homes stymied by China’s clampdown on capital outflows. Since the first of the year the country’s financial authorities now expressly forbid obtaining foreign exchange for the purchase of real estate, causing a crisis for mainland buyers of more than 10,000 Forest City units.
Buyers Might Get Refunds – Or Penalties
After news reports had indicated that mainland customers flown in on buying expeditions had signed English agreements which they couldn’t read, Country Garden’s latest comment indicated that “a complete set of the sales and purchase agreements are accessible in both English and Chinese at all our sales galleries in China.”
Based on a March interview with Country Garden Vice President Zhu Jianmin, vice-president of Country Garden, an SCMP report fueled rumors of clemency for those caught up in the mainland’s crackdown on renminbi leaving the country. Buyers who made down payments on properties at Forest City but are no longer able to transfer the rest of the payment “can cancel the transaction and there is no need to pay a forfeit fee,” Zhu was quoted as saying in the SCMP account.
The Forest City project involves the creation of four man-made islands in the Strait of Johor facing Tuas in Singapore, and to date, Country Garden has sold nearly 17,000 units for a total of RMB 20 billion ($2.9 billion), mostly to mainland Chinese buyers.
In the SCMP interview Zhu contended that only five percent of buyers were considering withdrawing their purchases in the Malaysian project, and Country Garden said on Thursday that fewer than 60 buyers had asked to cancel their bookings.
Capital Controls Continue to Bite
The Forest City kerfuffle began when China decided to enact controls on currency leaving the country in late 2016, and months later it was reported that Country Garden, China’s third largest developer, had shuttered its mainland sales offices for its Forest City project.
It was later reported that Country Garden had closed its offices to refurbish mainland sales centres “to better fit with current foreign exchange policies and regulations,” according to a statement from the company. Country Garden has since reopened half of its mainland sales offices after refitting them to feature other projects.
China continues to be a powerful and long-term investor in Malaysia, according to a report from Cushman & Wakefield earlier this month that stated China had overtaken Singapore as the number one investor in Malaysia. The C&W report stated that Chinese companies, largely developers, invested an estimated S$2.6 billion ($1.86 billion) across the causeway from 2014 to 2016, compared to the S$1.6 billion ($1.14 billion) spent by Singaporean firms over the same period.