Developers Fight Property Presales Ban
With a ban on presales being considered by a number of municipalities, developers are starting to speak out against what they claim is “unfair”. Developers have also asked officials to careful consider the impact the presale ban would have on the market, as it has the potential to impact both supply and prices.
Presales have proved instrumental in developers’ strategy of high-leverage and rapid sales. The sales ban would disrupt companies’ expectations of when they will receive payments from home buyers and upend their already-high debt-ratios.
One of the main arguments being put forth by developers is that they had purchased land plots with the belief that they would be allowed to do presales. To change the rules now would affect planning and disrupt the “capital chain”.
Many developers are already struggling with a new regulatory environment, narrowing funding avenues, and high debt ratios. Country Garden, for example, reported a debt to equity ratio of 2.8 times at the end June.
For the moment, only Guangdong, Hubei, Jiangsu, and Sichuan are considering ending presales, but analysts argue that the ban, if imposed, could eventually be enacted nationwide.
Proponents, meanwhile, argue that a ban would lead to improved quality standards and higher consumer protections. It would, in effect, prevent the now increasingly common occurrence of protesters gathering with claims of unfair pricing, poor building standards, and transparency issues.
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