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Private lending collapse highlights risk in real estate industry

, Handan city, Hebei province, some developers illegal fund raising, debt-servicing difficulties lead to raise panic. Interested parties in the real estate business Mo Pai found, 32 companies illegally raised funds and high interest deposit-taking behavior, involving a total of 9.3 billion yuan, and there are higher risks of 13 companies accredited to the working group.

from the Wenzhou, Erdos (600295 unit), Jiangsu sihong, now Hebei Handan, private lending and illegal fund raising of "myth" have been dashed, hidden risks surfaced. Especially with the adjustment of the real estate industry norm, profits in the past no longer exists, fragile capital chain is easy to break, lots of gray and even black into the private real estate industry is facing a severe test. Private lending collapse led to more private capital flow out of the property market, the current real estate industry is no different from adding insult.

when the illegal fund raising, loan-sharking, running and other frightening words frequently combined with real estate developers, people cannot help but ask, at a time when real estate is booming in the past, exactly how much private capital, with grey or even black way into this industry? In the past few years, due to the real estate market continues to be regulated, various financing channels of the real estate business have been tightened, listed the suspension, credit control, in this case, in all forms of "self" into real estate developers maintain important reliance on funding needs. Because of this, private funds through various channels, the influx of real estate. Southwest University of Finance Research Institute recently released report shows that China's private finance market size of more than 5 trillion Yuan last year. Such a large private funds, how much of the flow into the real estate industry, precise figures were difficult, but the real estate industry is certainly one of the most important destination.

one inescapable reality is that borrowing can easily be turned into illegal fund-raising or loan sharks. Especially during the real estate industry is booming, part of the real estate business in optimism, at promised usurious private money, tends to constitute an act of illegal fund-raising. Research patterns broadly summarized into three categories: to divide sales shops and its commitment to sell the forms of chartering after illegal fund-raising, which usually occurs in the Commerce and service development projects; in advance in the form of illegal fund-raising, now not as much construction, sales and other related real estate project approval procedures; use of real estate project development for illegal fund raising. These forms are largely secret, gathering huge amounts of private funds.

when the illegal fund raising as many real estate developers to stay in business "straw", risks are also buried. For the participants, ranging from enterprise was unable to deliver promised high interest rates, "buying" property disputes, it is money lost. Massive social problems also have – on the uncompleted, project funds, fails to perform a series of issues have emerged; lending banks at risk of inability to recover the principal and interest; since there are more persons involved, prone to mass events, and form a negative social impact.

fermenting Handan real estate market in illegal fund raising event, is one of the typical case. Similar cases have been in Zhejiang, Fujian, Inner Mongolia and other places there. Earlier this year, Ningbo Zhejiang XING larger real estate companies run a number of local real estate and its associated Enterprise capital chain rupture, resulting in insolvent. Local verification, run home and associated businesses with total liabilities of about 3.5 billion yuan, of which about 2.4 billion yuan of bank loans, there is evidence that more than 700 million yuan of illegal absorbing public deposits. The actual control of the company were arrested for crime of illegal absorbing public savings under criminal detention by public security organs.
need are of particular concern, with the increasing downward pressure on the economy, the housing market adjusting to the new normal, around the illegal fund-raising cases such as disputes, private lending is significantly increasing. Data show that the first 5 months of this year, 33 were investigated for illegal fund-raising cases in Sichuan province, an increase of nearly 1 time. In these cases, involved in the real estate industry are a minority. Some industry analysts said, three or four cities illegal fund-raising problems have not completely exposed, illegal fund-raising risk of fermentation, are likely larger than the size of the current outbreak, which must not be taken lightly.

further, as more and more borrowing staged crashes, illegal fund-raising cases broke out, will this lead to a vicious circle that leads to more private funds withdrawal from the real estate industry? Borrowing money is an important support of the real estate industry, has entered a period of adjustment, sales downturn, cash-strapped real estate, if the recurrence of the scale of private capital flows, which amounted to a fundamental, even worse. Therefore, required a lot of attention is similar illegal fund-raising events in Handan alone or is the tip of the iceberg. Lessons learned, risk prevention in place, is now the parties have to do homework.

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