Slump drives home sellers to the wall

Tight credit and weak markets are pushing some property companies to the brink, reports Hu Yuanyuan

An increasing number of Chinese property developers are facing the threat of bankruptcy as their credit dries up and weak sales have cut their cash flow to a trickle.

"We welcome investment from any company that can address our problems," Guo Yaoming, chairman of Guang Real Estate Group Co Ltd, told Southern Metropolitan News.

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The property developer, which is based in Shenzhen, Guangdong province, said in an online statement that the delivery of "a small amount" of housing units in Huizhou in the province had been delayed.

According to Guo, a capital injection of 300 million yuan ($48 million) to 500 million yuan would allow the company to weather the current crisis.

The company expanded rapidly in recent years, taking out a three-year private loan of 1.5 billion yuan to do so, only to see housing sales plummet. It has projects in 12 cities (including Beijing and Shanghai), and it employed 2,300 people as of the end of 2012, according to its website.

Guang isn't the only property developer facing financial woes this year.

In March, Zhejiang Xingrun Real Estate Co, based in Fenghua, a small city in Zhejiang province, was on the verge of bankruptcy. Published estimates said that the company owed 15 domestic banks a total of 2.4 billion yuan and individual investors another 1.1 billion yuan, although it had only 3 billion yuan of liquid assets. The company was at one time the largest developer in the city.

On Monday, media said that nobody had heard from the chairwoman of Qingdao Junlihao Holdings Ltd since late April. The company's debt could exceed 1.2 billion yuan, reports said.

Given sliding residential sales and prices in many cities, it's no surprise that concerns about the debt of overstretched borrowers continue to mount.