Updates on Chinese Real Estate Developers Debt

While the new Corona variant is posing a threat to the global financial system with panic fall in global market along with fall in commodity prices. But to the contrary, fall in commodity prices should be considered as ease in inflation but the market took the same in opposite direction with blood bath.

So can the blame game picture really accrue to new Covid variant? In the past we have seen many such new variants from UK, India, Indonesia etc. The Indian variant was the deadliest one where no Government lockdown was announced but people were themselves fearful for lives.

In all the above situation, Variants were new but market marched towards all time high. New variant is the mask behind any melt down in market. But these days let’s look at some of the markets globally.

S.No	Name of Index (Country)	52Week High	As on 01.12.2021	% correction
1	Hang Seng (Hongkong)	31,183.36	23,704	23.98%
2	KOSPI (South Korea)	3,316	2,901.98	12.48%
3	BOVESPA(Brazil)	1,31,190.30	1,01,915	22.31%
4	Nikkei (Japan)	30,795.78	28,014.89	9.03%
5	RTSI (Russia)	1,919.74	1,645.81	14.27%

Correction in these markets are nothing but various developments in various markets. Like Russia invasion plan but to the contrary the Russia inflow of money due to Gas crisis is highest. HangSeng correction due to crackdown by Chinese government but Yuan maintaining its levels against dollar.

Further a news is floating that the owner of Evergrande is now missing and Bond holders of Kaisa rejected the extension of time limit for repayment. The credit events which markets seems to negligent is highly interrelated to credit market of China. Further drainage of liquidity by Chinese Central Bank (PBOC) through Reverse Repo is now indicating that the things are critical for system is terms of support to sinking ship.

So continuing with our previous article on Country Garden, we will today give our viewers brief idea of few more companies detailed debt position as on 30.06.2021:

Particulars	Kaisa	Fantasia	Sunac
No of Projects	233.00	47.00	964
Project under Development (In Sq mt.)	1,09,39,505.00	82,71,638.00	16,50,00,000.00
Repayable within one year
Contract Liabilities	8.00	1.89	49.65
Contractors and Construction Expenses Payable	4.22	1.59	38.55
Lease Liabilities	0.02	0.01	0.03
Borrowings	3.88	1.32	14.12
Other Payables	2.52	1.71	0.01
Amount payable to related party	–	0.18	7.22
Total (In Billion $)	18.64	6.69	109.59
Repayable after one year
Lease Liabilities	0.07	0.04	0.07
Borrowings	15.34	4.97	33.01
Other Payables	0.01	–	0.02
Total (In Billion $)	15.41	5.01	33.09
Interest Expenses	0.92	0.17	2.03
Out of above Capitalisation of Interest in Land reflected in Balancesheet	0.73	0	1.92
Impairment of Goodwill	0.02	0	0
(Associates and Joint Venture Adjustment)
Restricted cash withdrawl due to  Bank Borrowings	0.24	0	19.13
Gurantee for Subsidiary companies or Contingent Liabilities	0.77	1.66	22.69
Total Liabilities including Contingent liabilities (In Billion Dollar)	34.82	13.18	158.15

Conclusion

Besides Evergrande, other real estate developers poses threat to Chinese financial systems. While the western world is busy with anticipation of bail out of Evergrande but the reality is far different. Many of these real estate developers are on the verge of bankruptcy.  So with slow down in pace of construction the vacuum created on demand side will be visible.

From CA Nishant Maheshwari and Vishal Vora

Disclosure: This article is for information only and should not be construed as a financial advice.

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