Recently, Evergrande Group released its financial report, which shockingly showed that in just two years, the company lost up to 800 billion yuan, and its total debt reached a staggering 2.4 trillion yuan, setting a new record for Chinese corporate losses. I thought that under the leadership of Xu Jiayin, Evergrande Group would be able to solve its problem of unfinished buildings, but unexpectedly, 706 projects are still at a standstill, which makes people wonder how much money is needed to complete the delivery. If these rotten buildings cannot be delivered on time, it will bring the following five tragic scenes to the whole country.
Bank non-performing loans will surge. Under the current home buying policy, buyers only need to pay 30% of the down payment, and the rest is done through bank loans. When a home is able to be delivered on time, the buyer will still repay the loan on time, even if the price falls. Once the home is in ruins, the buyer needs to reconsider whether to continue to repay the loan. As the number of people abandoning home purchases and cutting off loans increases, bank non-performing loans will rise sharply, which may eventually lead to bank bankruptcy.
Economic development will be severely hampered. As an important part of the national economy, the real estate industry has close ties with other industries. Once a large number of unfinished buildings appear, real estate-related industries, such as building materials, construction, design and decoration, will be affected, which in turn will have a negative impact on local government revenue and tax revenue. Falling land sale prices and reduced real estate taxes will adversely affect the economy.
In addition, the number of unemployed will increase significantly. In a country like China, where real estate investment accounts for a high proportion, once a large number of unfinished buildings appear, the number of unemployed will increase alarmingly. Unemployment will spread beyond and beyond the industry, and every person who loses his job will burden his family, society and the country. In recent years, with the downturn in the real estate market and the economic downturn, many people have lost their jobs.
At the same time, the divorce rate will rise. In today's society, a house has become a necessity for marriage, because people often say "no house without marriage". Look at the families who have purchased unfinished buildings, many of whom have already experienced divorce. If the unfinished building is never delivered, the number of divorces will increase significantly.
Finally, there will be a lot of disputes in society. Once the unfinished building cannot be delivered, the buyer will have to go through a lengthy legal battle with the developer. For those "house slaves" who choose to abandon their home purchases and cut off their mortgages, the banking industry will also be forced to take them to court. Both home buyers and banks will face inevitable disputes.
All in all, if the problem of unfinished buildings of Evergrande Group cannot be properly solved, it will have a huge negative impact on the entire society. It is hoped that the relevant departments will actively take measures to solve this problem in order to avoid the occurrence of the above-mentioned tragic scene.
According to relevant data, the financial difficulties of Evergrande Group have not only had a serious impact on the company itself, but also brought great challenges to China's economy and society. By the end of 2021, the total debt of real estate development enterprises nationwide reached 37.3 trillion yuan, while the debt of Evergrande Group accounted for nearly 6.5%. This means that if the crisis of Evergrande Group is not properly resolved, it will have a ripple effect on the entire industry.
For banks, the bankruptcy of Evergrande Group may trigger financial risks. As the main provider of real estate loans, banks' non-performing loan ratio is closely related to the real estate market. If Evergrande's unfinished building causes buyers to be unable to repay their loans, banks will face huge non-performing loans, which could lead to instability in the financial system. According to the China Banking Association, by the end of 2021, the balance of non-performing loans in China's banking industry had reached 3.9 trillion yuan, and the non-performing loan ratio continued to rise.
In addition, as one of the important pillars of China's economy, the development of the real estate industry is closely related to employment. The emergence of a large number of unfinished buildings will lead to the reduction of job opportunities in related industries, which in turn will lead to unemployment. According to the National Bureau of Statistics, China's urban registered unemployment rate was 5.1% in 2021, while the downturn in the real estate market and the crisis of Evergrande Group may further exacerbate employment pressures.
For home buyers, failure to deliver unfinished buildings will lead to long-term legal battles and financial hardship. They may have to wage lengthy legal battles with developers to seek protection of their legitimate interests. At the same time, they face the pressure of repaying huge loans and may even fall into personal bankruptcy. This will place a heavy burden on individuals and families, and may even trigger social instability.
It is imperative to solve the problem of unfinished buildings of Evergrande Group. Relevant departments should take active and effective measures to protect the rights and interests of home buyers, maintain financial stability, and promote the healthy development of the real estate industry. Only in this way can the above-mentioned tragic scenes be avoided and social stability and harmony maintained.
Resources:
1. China Banking Industry 2021 Report, China Banking Association, 2022.
2. China Statistical Yearbook 2021, National Bureau of Statistics, 2022.