Evergrande's finale is finally coming.
On January 29, China Evergrande was tried again in the High Court of Hong Kong. After the hearing, the judge formally ruled and approved the winding-up of China Evergrande. This means that China's largest real estate company has officially entered the liquidation process and started compulsory bankruptcy liquidation.
As soon as the news came out, the Hong Kong stock Evergrande Group and its many subsidiaries such as Evergrande Property and Evergrande Automobile were urgently suspended. At the same time, the outside world is also extremely concerned about the rights and interests of investors and owners after the liquidation of Evergrande.
To put it simply, a winding-up is a bankruptcy liquidation. Under Hong Kong law, when a company is unable to repay a large amount of debt for a long time, creditors can apply to the court for compulsory winding-up. Once the court approves the winding-up, the company will go into bankruptcy proceedings and all assets will be used to pay off debts.
Xu Jiayin once promised that "you can have nothing, but Evergrande investors can't have nothing". However, now Evergrande investors really have nothing, and Xu Jiayin himself is secretly busy transferring personal property. This act of perfidy has caused strong resentment from the outside world.
After Evergrande officially enters the liquidation process, what will be the fate of the rights and interests of tens of thousands of Evergrande home buyers? We have to face up to this reality.
First, the investor has nothing, and the delivery of the building is facing severe challenges
After Evergrande frequently reported the news of debt default and the breakage of the first chain, Xu Jiayin has always taken "guaranteed delivery" as his commitment in the face of doubts from the outside world. He said that Evergrande has signed a contract for pre-sale but has not yet delivered 677 projects, with a total value of about 15 trillion yuan. This has also become a key indicator for the outside world to judge the survival of Evergrande.
However, in the past year, Evergrande has not released any data related to the delivery of buildings. In the context of the continuous liquidation turmoil, the lack of these data raises doubts about Evergrande's ability to guarantee the delivery of the property.
In fact, most of Evergrande's real estate projects are located in third- and fourth-tier cities, where the real estate market is already fragile. In the past, frequent first-class wars have caused a large backlog of stock housing in these cities, and Evergrande's pre-sale projects are often too optimistic, such as "selling the house in advance and only building a model house" is not uncommon. Whether such projects can be delivered has become the biggest concern of owners.
It is foreseeable that in the process of liquidation, the delivery of the property will become a top priority. This determines the vital interests of thousands of home buyers, and is more related to social stability. Therefore, there is reason to believe that the issue of delivery guarantee will be given priority after the commencement of the winding-up proceedings.
However, according to Evergrande's current debt scale, it seems that it will face a lot of difficulties in completing these tasks in the short term. Evergrande's current total debt has exceeded 24 trillion, of which the debt related to real estate pre-sale is about 600 billion. In order to ensure that this part of the debt is paid off on a priority basis during the winding-up process, there is not enough money to ensure the delivery of the property.
Therefore, some real estate projects that have been developed to the later stage and can be delivered with only a small amount of funds are more promising to complete the delivery. However, many projects with a low degree of pre-development may not be able to be delivered in a short period of time. Buyers also need to be prepared for a long wait.
Second, Evergrande Automobile went bankrupt, and Xu Jiayin's last life-saving straw was broken
In the past year, Evergrande's real estate business has continued to suffer setbacks in the context of China's strict rectification of real estate leverage. As a result, Evergrande Automobile has almost become the only hope of Evergrande Group. In August 2021, there were also rumors that Newton Technology Group, owned by Tesla founder Elon Musk, planned to inject $500 million into Evergrande Automobile.
But in January 2024, Liu Yongzhuo, executive director of Evergrande Automobile, was taken away for investigation. Liu Yongzhuo is regarded as Xu Jiayin's confidant and important minister, and was once regarded as the first person of the group by the outside world. His investigation is tantamount to cutting off Evergrande Automobile's last hope as a "life-saving straw". Since then, Newton's investment plan for Evergrande Automobile has also been aborted.
According to the financial report, Evergrande Automobile's current total assets are 42.8 billion yuan, but the total liabilities are as high as 75.7 billion yuan, and there are more than 30 billion net assets and liabilities. It has struggled to assume any of the group's life-saving roles.
The fall of Evergrande Automobile indicates that the last assets of Evergrande Group will also be surrendered in the liquidation process. This is a heavy blow to the group.
3. The dilemma faced by home buyers and the way out
After Evergrande officially enters liquidation, the biggest victims will be tens of thousands of home buyers. The main dilemmas they face are:
1.Paid items cannot be delivered. This part is at the greatest risk and cannot be delivered for the time being.
2.Some projects are seriously lagging behind or only building residential facades. Such projects cannot be completed in the short term, and it is difficult for buyers to recover their deposits.
3.Projects in first- and second-tier cities may be nearing completion, and there is great hope for delivery. However, progress may be affected.
4.After liquidation, the cash flow of the project is tight, and the quality of subsequent renovation may decline.
5.Housing prices may be at risk, and home buyers' assets are shrinking.
In response to the plight of home buyers, the main recommendations are:
1.Look at it rationally, don't panic. Actively communicate with developers to fight for rights and interests.
2.Pay attention to the progress of the project and adjust the expectations according to the actual situation. Accept the possibility of project delays or degraded quality.
3.Apply for legal aid and seek to defend your rights if necessary. But it should be understood that developers are also facing difficulties.
4.Pay attention to the trend of housing prices in the city where the project is located to prevent the decline of assets from expanding.
5.Sit tight. Ensuring the delivery of the property is the responsibility of the first class, and it will be protected after liquidation.
Although the current situation is severe, as long as we are patient and positive, I believe that the legitimate rights and interests of home buyers will eventually be safeguarded. Let us firmly believe that time will prove that there is still sunshine behind the dark clouds.
IV. Conclusion
Evergrande's liquidation marked the end of an era in China's real estate market. In this era, China's real estate market has experienced rapid expansion and has accumulated the risk of being overly leveraged and over-reliant on the pre-sale model. The fall of Evergrande also indicates that the real estate market will usher in an adjustment and return to a more stable development model.
At the same time, we should also realize that the serious impact of the Evergrande incident on the interests of the majority of home buyers reflects the problems existing in the development of the industry. A truly stable market should allow the rights and interests of the broad masses to be fully respected and protected.
In addition, the commencement of Evergrande's liquidation proceedings will also demonstrate the spirit of the rule of law that a market economy country should have. History has proven that no enterprise or individual can be above the law and market rules. This is the cornerstone of a healthy society.
Learning from Evergrande's lessons, rationally looking at the adjustment of the property market, and firmly believing that the rights and interests of home buyers will eventually be properly protected, this is the basic judgment we should have. Under the general trend of market economy, China is moving towards the steady and healthy development of the real estate market. This is the progressive direction of history, and it will ultimately reflect the value of fairness and justice.