BEIJING: A Chinese property developer is giving back homebuyers the deposit they paid for apartments in a project it was unable to finish as part of a housing return programme coordinated by the local authorities, official media reported.
The refund coordinated by the government of the city of Nanjing is believed to be the first such case in China, the New Beijing News reported this week, and could set a precedent for other cities and developers to resolve the problem of unfinished homes that has dogged the real estate sector.
Since 2021, many developers across China have been unable to complete the construction of projects due to defaults. Policymakers are demanding developers to resolve the issue and deliver homes to buyers in order to ensure social stability.
In the eastern city of Nanjing, 33 of the 42 buyers of a development called Zhujiang Siji Yuecheng, which began pre-construction sales in April 2022, have signed agreements with the developer to return their flats and recoup their deposit, the New Beijing News said.
The developer is allowed to use the proceeds in the project's escrow account, totalling 50.67 million yuan (US$7 million), to refund the buyers. Escrow accounts are monitored by banks and the funds inside are usually allowed to be used to only finance construction.
The project had stopped construction around mid-2022 after the main contractor - Jiangsu Suzhong Construction Group - was hit by liquidity problems as it was one of the main suppliers to now defaulted developer China Evergrande Group, according to the newspaper.
The debt crisis among Chinese developers has created a glut of unfinished presold homes that have heavily weighed on home prices, consumer confidence and economic growth.
Even though the authorities have rolled out a slew of measures to boost property demand including reducing purchase costs and mortgage rates, homebuyers are still avoiding the market as they worry that new homes will not be delivered in a timely manner.
The politburo, a top decision-making body, on Tuesday pledged to continue to support the delivery of unfinished projects and turn unsold apartments into affordable housing.
Zhang Dawei, chief analyst at property agency Centaline, said the refund programme will likely make it more difficult to guarantee the delivery of unfinished homes.
"The vast majority of local governments and developers are unable to refund the owners of unfinished developments on a large scale, and Nanjing's practice can hardly serve as an example," Zhang said.