In the face of the insolvency of the detonating housing enterprises, it is not simply to inject liquidity to "guarantee the delivery of the building".
Xi'an Municipal Bureau of Housing and Urban-Rural Development and other five departments recently jointly issued 13 measures to effectively prevent the problem of delayed delivery of commercial housing. The picture shows the high-rise buildings on both sides of the Bahe River in Xi'an City recently photographed by drones. Photo: Xinhua News Agency
Text | Zhong Yan
On July 28, the Political Bureau of the CPC Central Committee held a meeting, in which it clearly stated its position on the "rotten tail buildings" that appeared in many places, adhered to the positioning of housing and not speculation, compacted the responsibilities of local governments, and ensured the delivery of buildings and stabilized people's livelihood.
The meeting of the Politburo of the Central Committee mentioned for the first time the "guarantee and delivery of buildings" and clearly pointed out that "compacting the responsibilities of local governments" undoubtedly set the tone for the next direction of real estate market policy.
This also shows that the "Baojiaolou" is not only a case of one bureau and one domain, but an event that may radiate and affect the whole region, not only to solve the contraction of demand at the level of people's livelihood, but also related to social stability.
Thunder real estate companies are facing more than just a liquidity crisis
Under the clear requirements of the central authorities, many places in the country are taking multiple measures to promote the "guarantee of the handover building". According to reports, the recent online transmission of the Zhengzhou city document "Report on the Voluntary Withdrawal of The City's Head Housing Enterprises from the Project" proposes four "exit" methods such as shed reform and unified loan repayment, project merger and acquisition, bankruptcy reorganization and affordable rental housing.
In addition, many places are also exploring local AMC (asset management companies) to intervene in bankruptcy reorganization to solve the problem of rotten buildings. For example, in June, Zhejiang introduced Zhejiang Shang Asset Management Co., Ltd. to bail out the real estate industry in the implementation of the responsibility of "guaranteeing the delivery of buildings".
The "guarantee and delivery of buildings" must operate on the track of marketization and rule of law, which requires that it must analyze the creditor-debtor relationship of various stakeholders in real estate projects in a detailed manner, and dredge these card points and blockages in a targeted manner.
At present, despite the complex entanglement of interests and the complex relationship between creditor's rights and debts, the logic of being trapped is relatively clear: under the contraction of market demand, the real estate market has entered a downward period of adjustment, and the real estate development mode of high debt and high turnover has led to the phenomenon of rotten buildings.
This also means that the unified loan repayment model in the shed reform in 2014 is no longer suitable for application to solve the problem of rotten tail buildings.
Because, the shantytown reform overall planning and unified repayment model is essentially a unified credit granting under the guise of local platform companies, which is faced with a relatively clear relationship between responsibilities and rights, taking the municipal financing platform as the carrier, financing financial institutions, and then injecting one project company after another to channel the cash flow of the shantytown reform project. The local financing platform takes the land reserve and the land transfer fee as the basis for granting credit, and the risk is relatively controllable.
However, at present, the explosive housing enterprises are not only facing a liquidity crisis, but also the essence of the balance sheet recession, that is, from the accrual basis, the housing enterprises are insolvent, but they are insolvent from the system of receipt and payment. This is because the land and project assets stored by housing enterprises face no market value - assets are not valuable, that is, the market transactions that activate these land and project assets need to be discounted.
This is not something that can be solved by an integrated and integrated model based on liquidity dredging. In addition, at present, the entire real estate market has entered the buyer's market, and the contraction in demand has been reflected in the land market, resulting in the credit leverage base point of unified loan repayment is no longer solid.
Therefore, if the "baojiaolou" cannot solve the problem of the balance sheet recession of the housing enterprises, without debt restructuring, bankruptcy liquidation and other work, only through liquidity injection for bailout, it will only increase the complexity of the creditor-debtor relationship of the problem real estate.
Local AMC intervenes or becomes the "standard of the guaranteed delivery"
As far as the current situation of the rotten building is concerned, fortunately, most of the real estate development is mainly based on independent legal person project companies, and the project company and the developer have a clear shareholding structure in law, which provides operability for "surgical operations" such as mergers and acquisitions, bankruptcy reorganization, etc.
Therefore, it can be said that the key link in today's "guaranteeing the delivery of buildings and stabilizing people's livelihood" is to block the creditor-debtor relationship after sorting out the creditor-debtor relationship of the rotten real estate. Taking the rotten tail building as an example, the project is listed separately, and after the pre-sale of the commercial house, the de facto ownership of the roof rotten tail building belongs to the owner and the mortgage bank, and the developer is basically the debtor.
Therefore, the intervention of local AMC in bankruptcy reorganization may become the "standard" of the market-oriented and law-based means of "guaranteeing the delivery of the building" in various places.
Specifically, whether it is bankruptcy reorganization or merger and reorganization of the problem developer, the restructuring entity can be determined first, such as the debt of the developer or project company to the local AMC, that is, the debt of the developer and other project companies under the developer is undertaken to the restructuring entity enterprise, which becomes the creditor-debtor relationship between the owner, the mortgage bank and the restructuring party, so as to separate the legal relationship between the rotten real estate and the project company.
This means that the local AMC and other restructuring parties, directly becoming the creditors of the developer, becoming parties to the merger and reorganization, bankruptcy reorganization or bankruptcy liquidation of the developer, can give full play to their professional advantages in this regard, provide funds for the subsequent development of the project, and thus ensure the normal handover of the rotten project.
The purpose of this is to legally cut the pre-sold physical real estate with the complex creditor-debtor relationship between the developer and the project company, so as to provide a solid guarantee for the "guaranteed delivery of the building".
Of course, for developers who are only troubled by liquidity, liquidity channeling can also be carried out through affordable rental housing. If the developer has an existing house with a clear creditor-debtor relationship, the local government may consider purchasing it or paying the long-term lease in advance to input liquidity for the developer to prevent it from ruining the building due to liquidity crunch.
In short, solving the problem of rotten buildings is no longer as simple as simply injecting funds into the real estate industry, but must be based on the rule of law and marketization, by straightening out the creditor-debtor relationship, peeling off the financial cloak of real estate, and liberating innocent owners from the complex real estate financial scene.
Written by / Zhong Yan (Senior Financial Practitioner)
Editor / Xu Qiuying
Proofreading / Lucy