Credit Bubble Collapses in Handan; Arrests Made; Developers Repaying Suppliers With Property

Handan's housing crisis is centered on illegal fundraising. Earlier this year, banks that used illegal fundraising collapsed, and now developers are going down. Ten of thousands of residents and roughly ¥10 billion is at stake. The local government has formed work groups to deal with the situation, with at least 13 companies already in trouble. One person who helped raise the money said 10% of Handan households may be involved, and in the case of one developer alone, there are more than 10,000 lenders.

Investors were offered high interest rates and preferential pricing on homes. Chen Wei Real Estate had one project where buyers who prepaid ¥50,000 ahead of time could see their pre-payment appreciate 30% in one year, plus received a VIP card good for ¥50 yuan off each square meter purchased. The firm stopped paying interest to investors in July though. The project was to start in August 2011, but today the site is still under construction. No one knows where the money went.

Another developer said they would not have used private money, but last year the banks stopped giving out loans. It borrowed ¥750,000 yuan at 3% monthly interest for 6 months, but could not repay lenders when the contract came due in July. The firm says that except for the cash crunch, business is normal.

Handan is a historic third-tier city of 1.6 million in Hebei province, but the total population covered by the city is nearly 10 million, making it the third largest administrative region after Baoding and capital Shijiazhuang. At the peak, there were 500 developers in Handan and 300 buildings doing advance sales. According to the article below, several projects have enough space to house the entire city population of 1.6 million. Sales in the first half of the year were only 5800 units, but 1300 of those came in January and by April, sales were down to 750. Analysts estimate Handan has 10 years of housing inventory.

Some developers have resorted to paying their suppliers with property, or at least giving property as collateral. The result is suppliers are now trying to offload properties in order to pay their costs.

Officials have begun arresting those involved in the fundraising. From Mingtiandi: GOVT RAIDS 13 HEBEI DEVELOPERS AFTER FUNDING SCHEME COLLAPSES
94 people were detained in a growing funding scandal involving real estate developers and private lenders in the northern Chinese city of Handan recently as a slowdown in housing sales exposed risky funding practices.

The government can restore order and a sense of justice, but it cannot restore confidence in the market with arrests.

iFeng: 三线城市开发商跑路引发危机 大量房子没人买

The real estate market downturn spread to Handan this third tier cities. Recently, funding strand breaks Handan part housing prices, triggering a chain reaction - many developers running, dozens of real estate appear downtime.

Due to the tightening of bank real estate loans, real estate funds, mainly from Handan private financing, with developers running, private funds of the principal and interest payment problem occurs, a large number of people involved in raising funds surfaced. Many real estate investors and stakeholders on the "Daily Economic News" reporter, said, Handan property market crisis.

According to Xinhua reports, Handan City, Hebei Province, for centuries, Wan together, Zhuo Feng and other developers of illegal fund-raising, fund-raising household debt service difficulties caused panic in the matter, local government departments involved in the initial Mopai amounted to 9.3 billion yuan, taking the fight against simultaneously coping with helping to prevent the worsening of the situation. Among them, 13 have a greater risk company accredited working group. Handan City, the leading group to combat illegal fund-raising and disposal of the person in charge said that the current case is stepping up investigation of illegal fund-raising among aid work are carried out simultaneously, illegal fund-raising of the masses as a whole tends to be rational, the overall situation is controllable.

Multiple projects involving private financing

On Handan local website, circulating a list of developers on foot, including the Golden Century, million-real estate; Metro International, Lake mansion, Zhuo Feng Shang House, etc. due to funding strand breaks, causing the creditor group debt collection; Fairview South, Days of Phoenix, Jishan Xintiandi, happiness Xinyuan, etc. due to problems caused by the owners submitted postponed blocking the road ......

Reporter survey found that the list of projects is indeed a problem of some enterprises. A developer frankly, now Handan real estate encountered financial difficulties, the city government has been involved in a lot of real estate.

As the crisis detonated, some of the people involved in raising funds surfaced. These people involved in real estate project financing throughout Handan City and the surrounding counties, an intermediate financing, dealers said Handan City, nearly 10 percent of families in private funds. At present, this data could not be verified, but the number of participants only Zhuo Feng estate financing amounted to 10,000 people.

After the developers "foot" or unable to honor, to raise the masses spontaneously organized and registered investment amount, the reporter and the combination of official notification by checking on these issues exposed several projects involving private financing of the sort, of which 1.5 billion yuan Golden Century estate; Cambridge Real Estate (Lake mansion) 280 million yuan; Chia Chia estate Nextron 300 million yuan; Zhuo Feng estate 1.6 billion yuan; Chen Wei estate (Lan Yun home project) 80 million yuan or more; estate Jin Jin Kui Kui Building 300 million yuan; In addition, Wei Thai real estate, Wan Poly Real Estate also involves a lot of private financing.

The project has been able to attract so much money, mainly to high interest rates continue to temptation. In addition, the developer also promised to invest now purchase a variety of preferential policies. Chen Wei Lan Yun real estate company to develop the project is in the name of home buyers attract investors. Buyers in the hands of "Lan Yun homeland VIP subscription reservation agreement" shows, booking people determine purchase intent, to pay the subscription amount of 50,000 yuan sincerity, VIP subscription monies appreciation function, VIP appreciation agreement for a period of one year, the appreciation of $ 30 %. When the project opened, VIP cards can be offset against the total housing fund, VIP users can enjoy the sales center at the base retail price of 50 yuan / square meter of purchase discount.

A buyers said that due to the purchase is Forward House, the price will be cheaper, plus capital appreciation, so a lot of people join the ranks of the subscription. Chen Wei estate before returning interest on a monthly basis, but in July this year, the interest is not returned, the developers also lost contact. Chen Wei current real estate solicitation to victims of 236, protocol number lined up over 1600 numbers, conservative estimates involve funds totaling more than 8000 yuan. The original plan in August 2011 to start the project so far is still a construction site, the money goes mystery.

From bank loans increasingly difficult

In addition to the huge private finance to invest in residential buildings, and some invest in the office, CP collar peak is located in Handan City People's Road, high-end office projects. July of this year, CP Nextron projects cover the funding came after twenty multi-strand breaks, more than 300 funds can not be cashed in fund raisers.

Investors Chia collar peak in the grand project demonstrated to reporters the agreement: 750,000 yuan loan, monthly interest rate of three points, the contract period of January 2014 to July a total of six months, the borrower with the CP project room collar peak source as collateral, and agreed maturity lenders can not repay the loan, the lender is entitled to deal with the collateral. Agreement estate collateral for the 26th floor of the room, an area 181 square meters, a total price of 906,000 yuan, but reporters on the scene saw the shops to cover only a dozen layers. September 15, the reporter as an investor advisory Chia estate, a staff member said Chia boss did not run away, "is now a criminal case, he will not run in a week to go to the Public Security Bureau report. Our company is normal operation, employees normally work, we will not run, we have to wait for the boss wages. "

The staff member said, the problem is project funding strand breaks, "Last year, the bank will not give us the loan, if the bank loan, we will not find a personal finance." According to official notification, the amount of financing Chia folk around 300 million.

Given the national real estate policy tightening, developers get loans from banks has become increasingly difficult. There are developers said, "Banks are not lending, we have no way." Handan City Bureau of Housing office Jizhu Ren told the "Daily Economic News" reporter, said that before banks like developers, large secured loan, but Now developers can not from bank loans, which is a national-level policy, no way.

Reduce developer funding sources, private interest money gone from monthly interest rate of 1 rose 2 points or 3 points. 冀主任 said: "If the funding needs are not so great, who would not benefit a couple of minutes, ten thousand principal amount of three years doubled, but the developers earn 50 million investment and 5000 universal right now developers profiteering era has ended? . "

Property inventory digestion or take 10 years

As a third-tier cities, housing prices currently prevalent in Handan about 5000 yuan / square meter, and some upscale district of seven or eight thousand dollars, Handan overall impression is: this year despite the decline in house prices, but the decline is unlikely.

Huge stocks become a major issue in Handan property market. A local real estate industry sources said, there are 500 developers, real estate Handan nearly more than 300 pre-peak, and many large-scale real estate. Zhao Metro 20000 can accommodate, as well as Seoul similar Huadu, Central Park and other large real estate, real estate enough to accommodate these stocks Handan 1.6 million urban population centers.

Reporter to interview Handan City Housing Authority, but refused to disclose to reporters Handan property-related figures. Publicly available data, Handan City in 2013 only to move back to the main urban housing starts reached 10,470 units (households), completed 15,351 units (households). In addition, Handan local real estate research firm analysts, Handan in the sale and the sale of real estate projects a total of about 34.8 million square meters. And in 2013, Handan sale of real estate in a total area of ​​3.558 million square meters, in order to measure the local real estate stocks need to digest nearly 10 years.

However, Jizhu Ren believes not only by a few figures to determine Handan excess property, "Now Handan City, attracted a large number of buyers from neighboring counties, half of all owners of real estate and some surrounding counties. Now urbanization, More and more people will be into the city. "

Handan Party Secretary Gao Zhihong also mentioned in a recent forum on housing prices, as the city continues to accelerate the process of urbanization is increasing and improving housing demand, real estate development advantages will become more apparent, companies must be visionary, confidence in the future development of the industry.

The original real estate speculators in Handan Li Feng seems, now there are a lot of Handan property bubble, this year advertising the sale of flats in Handan City for many years failed to become the scenery, not only on the street, do direct advertising sales house, real estate companies of all workers battle sold, "but now the real estate group has disappeared, investment buyers almost zero, basically just need to buy to buy, but the inventory is still high."

Li Feng said that due to outstanding payments, material models, many developers directly with the house mortgage, which allows builders, material suppliers also become sellers. And builders are more favorable in the hands of real estate, which is a disguised form of price cuts.

According to the data, in the first half of Handan city, 5,814 sets of commercial housing turnover, January Handan Transacted property market for 1328 sets new homes, the highest point in the first half, only turnover of 751 units in April, May and June to enter the property market is still sluggish.

In the context of property sales in the doldrums, Handan developer has shown signs of funding strand breaks. August 8 this year, Handan municipal government informed the illegal construction since 2014, outstanding payments and wages adverse social impacts of the construction (development), construction units and individuals, which involves seven Wei Thai real estate developers, Hebei Engineering construction of more than 10 builders.

These phenomena increase the sentiment of buyers, housing sales are sluggish business performance to decline, resulting in further capital chain tension. Downturn in the real estate market transactions, corporate inventory to pressure rise, and capital returns nervous, any sign of trouble can cause a ripple effect throughout the market. Many investors say housing prices after some not so big problem in itself, but as Handan Golden Century benchmark housing prices, it exposed the problem, follow the trend of other housing prices, the money is not honored.

Reporters at 26th Floor, New Century Plaza, Century headquarters to see the entire company has been left vacant, only a few dozen investors, acquired the honorary title of Golden Century filled the entire room, including the "2012 Top Ten Handan City real estate business "awards.

The local government in combating illegal fund-raising

In fact, after July Handan developers repeatedly exposed the problem, August 19, held that the city of Handan City, combat and disposal of illegal fund-raising work leading group meetings and thematic workshops. August 26, Handan City reconvene to combat illegal fund-raising meetings and on the same day issued a circular urging all kinds of illegal fund-raising staff and agency heads on September 30 this year, gave himself up, and actively cooperate with the judiciary to carry out investigation of cases.

The circular object is "all kinds of cases of illegal deposits from the public charge agency fees, commissions, rebates, commissions, royalties and other expenses account manager or other person." Officials involved in handling the case, said the reason to get this group of people "cut", Handan Municipal Government after careful consideration, one can make this high-pressure situation of this group of people will unjust enrichment "spit out"; another On the one hand through the entire skeleton of this group may be illegal fund-raising enterprises or groups to figure out, so the next deployment and combat operations, will be more targeted.

Earlier, an official said Handan City, Handan Economic Investigation is now illegal fund-raising effort to track down these cases, some developers have more than a dozen accounts, but the account is only ten dollars, do not rule out that some transfer of funds, "Now can think of ways We all thought. "

Recently, the fight against illegal fund-raising has become Handan municipal disposal theme. September 4, September 10, just a few days, Handan has held combat and disposal of illegal fund-raising work conference, the mayor, deputy mayor, led the scheduling and deployment of combat illegal fund-raising work. Handan Municipal Committee, Municipal combat and disposal of illegal fund-raising, deputy head of the Leading Group, Office of the Director Zhang Rui book at the meeting on September 10, said the main responsibility to strengthen the work, to crack down on illegal fund-raising to help companies ride out the storm and combined its best efforts to reduce the loss of raising the masses.

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