The Chinese Government is considering the seizure of Chinese developers’ idle land to fund stalled housing projects. The delay in completion of these projects has resulted in mortgage boycotts all across the country that is crippling the nation’s housing market. The proposal effectively allows local governments to take control of any land that has gone undeveloped for 2 years, without compensation. This will give the authorities the ability to direct funds towards unfinished projects by assigning these developments to stronger competitors. This policy consideration is an indication that the government is favoring homeowners over bondholders – who have been heavily impaired by the defaults of Chinese real estate giants such as Evergrande.
The top 100 Chinese developers collectively owned land parcels worth $6.3tn at the end of 2021, according to China Real Estate Information Corp. Many of these developers funded this through borrowing with anticipation that prices would continue to rise. Out of the land parcels auctioned in the first and second batches of centralized bidding last year, work has only started on 37% and 16% of the batches respectively.
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