CHINA
Shanghai faces first mortgage boycott as stalled housing project angers homebuyers

South China Morning Post
Sun, October 1, 2023
People who had agreed to buy homes at a residential complex under construction in downtown Shanghai have expressed dismay at the pace of the development, which resumed a month ago, raising the prospect of a boycott on mortgage payments that threatens to worsen sentiment in China's embattled property sector.

Since August 31, only a handful of workers have been conducting building work at The One-Rivera Shanghai, a project led by Shanghai Dongying Real Estate and located on Puyi Road in Pudong, according to two buyers who signed home purchase contracts and declined to be identified.

One buyer said the cash-strapped developer did not appear close to completing the project, and the recent resumption of development work looked "half-hearted" - likely a temporary measure to soothe outside concerns.

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No heavy equipment or workers were seen at the construction site when this reporter visited on Sunday during China's week-long National Day holiday.

Dongying could not be reached for comment.

Outside the construction site of The One-Rivera Shanghai. Photo: SCMP/Daniel Ren alt=Outside the construction site of The One-Rivera Shanghai. Photo: SCMP/Daniel Ren>

Construction had stalled at The One-Rivera Shanghai, which consists of about 300 flats in two buildings, after a liquidity crunch hit Dongying in early 2022. Homeowners in the first building were supposed to get their keys by March 12, 2022, while the second lot was set to delivered on December 10, 2022, according to the buying contracts.

Dongying missed both delivery deadlines.

By early August this year, dozens of homebuyers warned the developer and the local government that they would stop repaying mortgage loans from September if construction failed to resume by the end of that month.

Located within Shanghai's Inner Ring Road, an elevated expressway loop, The One-Rivera offered flats at about 110,000 yuan (US$15,080) per square metre, with prices ranging from 15 million yuan to more than 30 million yuan.

Homebuyers interviewed by the Post in late September declined to say if or when they would stop repaying mortgage loans.

"A mortgage boycott is likely because delivery of the expensive homes has been delayed for more than 500 days, which has already infuriated buyers," said Yin Ran, an angel and property investor in Shanghai. "Given that the developer is stuck in a liquidity crisis, it is difficult to see a happy ending to the drama any time soon."

A mortgage boycott at The One-Rivera Shanghai would be the first of its kind in the Chinese financial and commercial hub, as the nation has become embroiled in a property crisis that has seen dozens of developers mired in capital crunches.

The troubled Shanghai project has invoked memories of a nationwide boycott about a year ago, which spread to more than a hundred cities as builders fell behind schedule due to tight funding and strict Covid-19 curbs.

Developers from China Evergrande Group to Kaisa Group Holdings were swept up in a wave of bond and loan defaults triggered by austerity measures that Beijing put in place in 2020 to reduce developers' leverage ratios.

Over the past two years, about 50 mainland developers have defaulted on some US$100 billion worth of offshore bonds, according to a JPMorgan report in December, with 39 seeking restructuring plans with creditors for US$117 billion in stressed debt.

On Thursday, China Evergrande Group said its chairman and founder Hui Ka-yan had been placed under "mandatory measures" due to "suspicion of illegal crimes", hours after the distressed property developer suspended trading of its shares and those of its two major subsidiaries.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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