China is stepping up supervision of financing for Evergrande real estate projects
BEIJING (Reuters) – Several local governments in China have set up special depots for real estate projects from the heavily indebted developer Evergrande to protect funds earmarked for housing projects from being diverted, Caixin media agency said.
With less than $ 305 billion in debt, Evergrande missed a grace period on a dollar bond last week, and his silence on the matter has led global investors to wonder if they would face large losses after a 30-day grace period have to accept.
The special accounts have been set up in at least eight provinces since late August, where Evergrande has the most unfinished projects, the Chinese outlet said on Sunday, citing a source close to the developer’s management team.
These include Anhui, Guizhou, Henan, Jiangsu and cities in the southern Pearl River Delta.
The custodian accounts are designed to ensure that homebuyers’ payments are used to complete Evergrande’s housing projects and are not diverted elsewhere, such as to creditors, Caixin said.
In some southern cities such as Zhuhai and Shenzhen, the offices of the Housing Inspectorate, Ministry of Housing and Urban Rural Development are also involved in monitoring and reviewing the use of funds through Evergrande’s projects, it said.
Evergrande and the Housing Department did not immediately respond to requests for comment.
In the past few months, the insolvent developer who embodies the loan-to-build business model has stopped repaying some investors and suppliers, and has stopped construction on many projects across China.
The Housing Inspectorate has also set a September 24 deadline for regional offices to report funding gaps on Evergrande’s unfinished projects, Caixin said, but it was not immediately clear whether these were being met.
By the end of June, Evergrande had 1,236 projects for sale, according to a semi-annual report, including those that were completed and those under construction.
Last week, the Wall Street Journal said Chinese authorities had asked local governments to prepare for a possible collapse of Evergrande, and urged them to prevent unrest and mitigate the impact on the rest of the economy.
(Reporting by Cheng Leng, Yilei Sun, and Ryan Woo; Editing by Clarence Fernandez)