The suspension of a real estate project in Henan province by a development giant is sparking frustration among investors who are also given red codes similar to the local banks’ depositors.

According to Chinese media, Sunac China Holdings, one of the country’s biggest property developers, construction has almost ground to a halt at the Zhongyuan Grand View project in Zhengzhou, Henan.

The funds in the supervision account of Zhongyuan Grand View are suspected of being misappropriated by the company.

Zhongyuan Grand View is a residential real estate project, located in Jinshui District, Zhengzhou City.

Sunac began to sell the houses in the project in 2018. The developer originally promised to deliver the houses in July 2022, but the project has been suspended since November 2021. 

Hundreds of investors have petitioned to protect their rights.

In April 2022, some investors went to the local banking and insurance regulatory bureau to ask for the reasons behind the suspension of the project and the unclear use of supervision account funds. But in June, these investors were inexplicably assigned “health red codes,” making their rights protection actions difficult.

These cases are similar to the situation of the depositors at Henan rural banks whose health was turned from “green code” to “red code,” restricting their travel and preventing them from protesting.

China Economic Weekly reported on July 11 that investors have been urging Sunac to resume the construction since early March. But the developer has not been able to fully resume the project though it held a ceremony to announce the resumption on May 20.

Some investors revealed that the resumption ceremony was just a show. The workers in the ceremony just entered the scene, wearing work clothes. And as soon as the ceremony ended, they exited the construction site over the wall. 

There was no sign of a full resumption of construction in the following month. By the end of June, there were only 20 or 30 workers on the construction site.

Sunac may reportedly encounter liquidity pressure, affecting their real estate projects in many places.

An investor named Zhang Jianguo (pseudonym) provided the materials  on March 29, showing a tripartite communication between the developer, the relevant agencies and the investors’ representatives. Sunac admitted that there were indeed funds transferred by the headquarters, and the project was insufficiently funded. The relevant agencies asked Sunac to return the illegal withdrawal within a time limit, but there was no follow-up on this matter.

As Reuters reported, Sunac’s shares had been suspended from trading since April 1 due to its failure to disclose its 2021 annual report as scheduled. 

Since the beginning of this year, many governments in the mainland have introduced policies to rescue the market, but the real estate market is still sluggish.

Real estate data service provider Keerrui said that there are many problems in residential projects in Zhengzhou. By the end of 2021, the total construction area of the problematic projects that have not yet been delivered in the city was about 2.7 million square meters, accounting for 29% of the transaction areas.

Not only Zhengzhou, housing companies in Chengdu, Quanzhou, Heze and other cities have recently also issued statements of deferred delivery of their projects. Some said they are affected by the Covid epidemic. And some said they actually have been impacted by the capital crunch.

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