Mortgage revolt over unfinished Evergrande homes threatens Chinese economy

One of China’s largest property developers is facing a rebellion from buyers during a property market crisis caused by a debt mountain.

Work has stopped at the Longting development, which is already a year behind schedule. Picture: Qilai Shen/Getty Images/The Times

One of China’s largest property developers is facing a rebellion from buyers during a property market crisis caused by a debt mountain.

Hundreds of people are refusing to pay Evergrande any more for their unfinished flats at its Longting project, which is already a year behind schedule. The buyers will end mortgage payments for homes bought off plan in Jingdezhen in the southeastern province of Jiangxi unless work resumes by October 20.

It is one of about 80 such “rotten buildings” accounting for about 5 per cent of homes under construction and threatening the Chinese economy.

One woman, who gave her name as Wang, told The Paper, a state-run website, that her family put down 300,000 yuan ($65,870) for a small flat in the Longting project after her in-laws sold their home and her parents chipped in.

“We basically used all our cash toward the downpayment – we put all our money on this flat,” she said. “I am a stay-at-home mother with no income, and my husband is the only breadwinner. Construction has not resumed but we still are paying the mortgage. I can no longer pay for anything. No one wants to default on a loan but I will not pay even if I get blacklisted.”

In the central city of Zhengzhou, a woman named Lin bought a flat in 2018 that was due to be completed by the end of last year. She has yet to receive the key. “Without our new homes we still need to rent a flat, which means we are paying rent and the mortgage at the same time,” she told The Paper.

Construction has been suspended on 500 million square metres of flats across China worth up to $438 billion in bank loans, according to a report by GF Securities.

It warned that the figure could rise as sales stall. Evergrande has more than $438 billion of debt after its bullish expansion was met with tighter regulations. The government has ordered the company to honour its contracts but it is struggling.

Homebuyers have accused banks of releasing home loans without due diligence. One developer has been accused of embezzling funds.

Chen Zhe, of the Economic Observer, a business news site, said: “If more homes cannot be delivered … all the measures by the government and by private businesses to stabilise the economy could all be in vain.”

The Times