China's third-largest real estate developer by value has just announced a huge promotion involving all of its projects across the country. China Evergrande revealed that it will kick off a one-and-a-half-month sales campaign that will offer potential buyers of its properties up to 25 percent off the original price.
The developer claims that the promotion will be the biggest ever nationwide price cut in the industry. According to the company's chairman, and China's third-richest person, Xu Jiayin, the promotion is meant to help the developer cope with the changes and challenges that the industry is currently facing.
Starting on February 18, all of China Evergrande's projects will be offered with special big discounts. Until the end of the month, all of the available units in the company's vast portfolio will be offered at a 25 percent discount. At the start of March, the same units will be given at a slightly lower 22 percent discount.
Based on the number of units available and the size of the discounts, the new campaign could very well be the largest ever carried out by the company since it was established. In its latest annual report, China Evergrande currently has 811 active projects with available units still on sale.
Apart from ensuring the continued sale of its properties, which are currently being affected by the ongoing coronavirus epidemic, the massive discounts are expected to generate much-needed cash for the company. The influx of cash expected from the promotion should ease the company's finances as it deals with the continued home sales plunge throughout the country.
Analysts have pointed out that developers likely do not want to cut prices at this time, but given the current situation, most will have no choice as they are finding it very hard to sell their flats at their current prices.
According to property and consulting firm China Real Estate Information Corp, developers across 110 cities and 12 provinces have been asked to shut down developments and sales centers to avoid the further spread of the novel coronavirus. This has resulted in shrunken cash flow and unpaid loan payments for developers.
In January, China Evergrande reported a 6 percent drop in its home sales to 40.5 billion yuan for the month when compared to the previous year. The company also reported standing debts of about 813.2 billion yuan since June last year. Fortunately, the company was able to raise around $2 billion through bonds with an interest rate of around 12 percent.