You are here
Kaisa's US$150m shanty town development at risk
CHINA'S Kaisa Group Holdings faces losing its entire investment of almost US$150 million in a key urban redevelopment project, underscoring the vagaries in the country's property market.
The Shenzhen-based home builder, which gained notoriety in 2015 when it became the first developer from the nation to default on US dollar debt, has invested more than one billion yuan (S$198.6 million) in a project in Xi'an to transform a shanty town into residential dwellings.
The project had been abandoned for about two years before Kaisa came on board in August 2017, acquiring a majority stake in the development from Xi'an Xinlicheng and the rights to continue construction.
However in September of that year, another local builder, Xi'an Xingzhengyuan, removed Kaisa's legal title to the project, making its investment worthless, Kaisa said in a statement to Bloomberg News on Wednesday.
Tensions between the two came to a head last week when Xingzhengyuan allegedly drove excavators and forklift trucks into the construction site, and caused a Kaisa local executive to seek medical treatment, according to the statement.
Since 2015, the People's Bank of China has showered 3.3 trillion yuan of helicopter money on shanty-town redevelopments in an effort to improve housing for the nation's poor.
But despite assurances from authorities that all is well, the ambitious programme hasn't been without its hiccups.
Last November, Cifi Holdings Group had its urban redevelopment project in Taiyuan city derailed after local planners arbitrarily scrapped a land auction that would have allowed the developer to bid for legal access to the plot.
Not before Cifi, along with its co-developers, had spent some 10 billion yuan to relocate existing residents, local media reported at the time.
Kaisa is now seeking to pursue Xingzhengyuan in China's highest court with the aim of winning back its legal rights to the site.
The battle has already stretched on for 14 months, with Kaisa and Xingzhengyuan winning judgments in lower and higher courts in Shaanxi province respectively.
Waving goodbye to a one-billion-yuan development project isn't something Kaisa will be able to easily stomach. Its net income for 2017 was 2.5 billion yuan after three years in the red.
Kaisa's Hong Kong-traded shares slumped 8 per cent on Wednesday, the most in a month. The stock recovered on Thursday and rallied by as much as 1.7 per cent. BLOOMBERG