Nanjing project sets refund precedent

Chances are greater that homebuyers — long troubled by overdue housing deliveries nationwide — will be able to get their down payments back, experts said, as the first case took place in Nanjing, Jiangsu province, with the coordinated efforts of the government.

Prospective homebuyers in Zhujiang Siji Yue Cheng — a housing project that remained unfinished for about two years — can take back their down payments upon request, according to official replies from local authorities on a public affairs board set up online by people.cn.

Refund processes will be supervised by relevant local authorities, officials told netizens on the online board.

After China stressed promoting residential property completions and stabilizing people's livelihoods, "This is the first case in China where buyers can reclaim their down payments under government coordination, and it is also the outcome jointly generated by the property developers, local governments and financial organizations in protecting ordinary homebuyer interests," said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

Authorities in the Jiangning Development Zone, where the project is located, said the developers had agreed to refund the down payments, but without providing compensation for mortgage interest. As of July 29, a total of 33 households reached agreements with the developers, with nine households still negotiating with developers for settlement, China Newsweek reported.

"Although there will be no subsidies or compensation for mortgage interest, refunding of a residential property project payments helps protect most homebuyer interests, and it offers a practical precedent for solving similar situations in the future," said Li.

According to the initial development plan, the Nanjing project will be built into a major urban mixed commercial complex, with an investment of 10 billion yuan ($1.4 billion).

The residential project kicked off presales as early as 2021. However, due to the impact of property developer China Evergrande Group's debt crisis, investment disputes emerged between the project's developer and major contractor, which finally led to the project's construction suspension since July 2022.

"There used to be singular cases of homebuyers getting refunds for uncompleted residential flats through private negotiations. The case in Nanjing is unique because this is the first time that the refunding process was made via promotion and coordination of government divisions amid the central government's constant efforts to ensure residential property projects get delivered," said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.

Labeling the case as a benchmark in the sector, Yan said refunding of down payments largely depends on the cash flow status of the property developer, and that the refunded project offers an option for local governments to further develop government-subsidized projects.

Since July 2022, the central government has been taking a firm position on ensuring the delivery of housing projects. The conference on ensuring such deliveries in May reaffirmed that efforts will be made in key tasks to this end, including de-risking unfinished commercial housing, promoting project deliveries and digesting housing inventories in some areas.

Experts said the delivery of housing projects has become an important task in stabilizing the real estate market.

"It is worth noting that the capital in the project's presale capital supervision account made the refund possible, which is also the result of the government's strengthened supervision over presale capital since 2022," Li from the Guangdong Planning Institute said.

"The experience of this case provides a multichannel solution in dealing with unfinished property projects as well as protecting the rights and interests of individual homebuyers."