China’s real estate sector has been undergoing a harrowing crisis. The fall of real estate major Evergrande was the tipping point, with other big and small property developers falling like dominos afterwards. While the builders may get a reprieve using government policies, the homeowners came out the worst-hit.
The once-booming property market of China now wears a desolated and dilapidated look. The builders are not willing to take on new projects while the ones underway have been halted, leading to a precarious situation.
According to a report compiled by Shanghai E-House Real Estate Research Institute, stalled projects accounted for 3.85 per cent of China’s housing market up until June this year which is equivalent to an area of 231 million square metres.
Consequently, home buyers are being forced to enter and live in unfinished and ‘rotting’ apartments. The living conditions are harsh, with even basic amenities missing.
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While some are living in the flats braving bad conditions, others are forced to live on rent in the same city. In addition to the mortgage of the flat, the burden of rent is breaking the back of many.
“All the family’s savings were invested in this house,” Xu, a homeowner was quoted as saying by Reuters. Xu bought a two-bedroom flat in 2019, a year after the builder started the construction of the apartment.
While everything was smooth-sailing in the beginning, things came crashing down in 2020 when the parent company of the builder was accused of illegal fund-raising. The properties of the builder were seized and work on the apartment was halted, forcing Xu to run from pillar to post but to no avail.
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The condition that home buyers across China has been so dire that, they started collective disobedience in June, threatening to halt mortgage payments if the construction did not resume.
Till July, homebuyers in 80 Chinese cities had refused to pay their mortgages, affecting the future of over 200 projects.
“If this issue is not resolved, it will affect property transactions, the government’s credibility, and it could exacerbate the developers’ debt problems,” said an official at the Shanghai E-House Real Estate Research Institute.
The fall of China’s real estate market is one of the prominent reasons why the economy has grown at a measly pace of 0.4 per cent in the April-June quarter. The Politburo of the ruling Communist Party has all but given up on achieving the end-of-the-year GDP growth rate, and thus experts believe there is little hope of seeing an improvement in the condition of homeowners.
(With inputs from agencies)
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