China Evergrande Group (恒大集團) yesterday began a nationwide sales promotion with its deepest-ever discount on all real-estate properties, part of the developer’s effort to boost sales and meet its target of cutting debt by half.
The promotion on residential real estate comes with a 30 percent price cut, according to a statement from the property developer.
That is the heaviest base discount Evergrande has ever offered since it began a signature promotion twice a year in 2011, according to Bloomberg calculations based on previous marketing material.
The sales campaign is to last until Oct. 8, which marks the end of China’s weeklong national holiday. While Evergrande routinely offers discounts during holidays when Chinese tend to shop for apartments, the promotion has also come earlier this year.
Last week, Evergrande vowed to increase sales as part of its efforts to meet an aggressive deleveraging target — cutting borrowings by about 150 billion yuan (US$22 billion) each year from this year to 2022, or about half its current debt load.
So far it has fallen short of the pledge. Total debt rose 4 percent to 835 billion yuan as of June 30, compared with 800 billion yuan at the end of last year, according to its most recent earnings report.
Hui Ka Yan (許家印), chairman of the builder and electric-vehicle developer, announced a monthly sales target of at least 100 billion yuan for this month and next month during an internal meeting at 10pm on Sunday to mobilize staff.
He described the monthly goal, which would be the biggest-ever among Chinese developers, as a “military order,” according to the company’s statement.
The move also came after China’s housing watchdog and the central bank created draft rules to monitor developers’ capital last month. The proposal might lead to a tightening of overall financing, S&P Global Ratings said.
“I would call it neutral or slightly positive, depending on the outcome,” Loomis Sayles Investments Asia Pte Ltd senior credit analyst Feng Zhi Wei (馮之瑋) said. “Evergrande needs high asset turnover and needs to act in advance since China is tightening policies again.”
However, some market watchers are skeptical whether the price cuts would be as deep as described. Local authorities in China usually control housing price through so-called “pre-sales permits,” and might have a say in the final offering price.
“Evergrande likes to use discount marketing strategy,” said Tan Songheng, head of fixed income at Bank of Sanxiang Co (三湘銀行) in Hunan Province. “Maybe it can first pull up the prices, and then give a 30 percent discount. Time will test the authenticity of this announcement.”
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