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After two years of suspension of construction, owners of Pearl River Four Seasons City in Nanjing, Jiangsu Province can now cancel their contracts and get their down payments refunded.

The contractual delivery date for Zhujiang Four Seasons City, located in Jiangning Economic and Technological Development Zone (hereinafter referred to as "Jiangning Development Zone"), Nanjing City, Jiangsu Province, is June this year. However, the project has been suspended for two years and cannot be delivered on time, leaving homebuyers with no choice but to become owners of unfinished buildings.

Since 2023, many netizens have reported on the People's Daily Online leadership message board that Zhujiang Four Seasons City was supposed to deliver the units in June this year, but the project has been suspended for a long time and the delivery is nowhere in sight, so they want to apply for a refund. In June this year, an owner posted a message on the message board saying "Assist me to check out", saying that the developer's negotiation to check out was rejected, and that he had to scrape together the 140,000 yuan down payment, "I beg the government to help me."

Nanjing Jiangning Development Zone responded that it had organized a meeting with the developer to urge the developer to come up with a refund plan and specify the corresponding time node. The final negotiation result was that the developer said that it would only refund the refund amount, without any mortgage loan interest compensation. At present, most owners have signed relevant agreements with the developer. Regarding the netizen who left the message, Nanjing Jiangning Development Zone said that it had communicated and negotiated with the developer and suggested that it return the down payment.

It is reported that this is the first case in the country where the government coordinated the centralized return of houses and refund of down payments after the suspension of construction of a residential project. In the view of industry insiders, although the interest cannot be refunded, for anxious owners, being able to return the house payment is already precious, and it also provides a reference for similar situations in other places.

33 households have signed check-out agreements

Public data shows that the Pearl River Four Seasons Joy City complex project is developed by Nanjing Dingrui Real Estate, which includes five plots, namely G96, G97, G98, G104 and G105. It is reported that Nanjing Dingrui Real Estate is 49% owned by Nanjing Airport New Town Urban Development and Construction Co., Ltd. and 51% owned by Nanjing Zhujiang Jingming Enterprise Management Consulting Co., Ltd., of which the latter is Zhujiang Investment after equity penetration.

In 2021, Zhujiang Investment entered the Nanjing real estate market for the first time, planning to invest 10 billion yuan to build the Airport New City commercial center, R&D offices, livable residences and related supporting facilities, making it the first large-scale urban complex in Nanjing Airport New City. At that time, it became the focus of the market with its huge investment scale and planning volume.

Among them, two residential plots, G98 (Yueming Jiayuan) and G104 (Dingrui Jiayuan), will be launched in 2021 and 2022. Among them, G98 (Yueming Jiayuan) has a total of 9 buildings, which will be launched for the first time in July 2021 and originally scheduled to be delivered at the end of June 2023; G104 (Dingrui Jiayuan) was launched in April 2022 and is scheduled to be delivered in June 2024.

Public information shows that the project's general contractor, Suzhong Construction Group, was dragged into operational difficulties by Evergrande and had a dispute with Zhujiang Investment, so the project has been suspended for more than two years since July 2022. During this period, the project also launched a new general contractor bidding to promote the resumption of the project, but it was ultimately not implemented.

Therefore, since last year, some owners have reported that the project has been suspended for a long time and the delivery of the houses is nowhere in sight, and they want to apply for a refund. In mid-July this year, in response to the owners' demands for refunds, Nanjing Jiangning Development Zone organized several talks with the developer, planning to use the funds in the supervision account to initiate the refund. At present, most owners have signed relevant agreements with the developer.

On July 29, according to the Beijing News and other media reports, the Nanjing Jiangning District Real Estate Bureau responded: Dingrui Jiayuan, promoted as Pearl River Four Seasons City, was developed and constructed by Nanjing Dingrui Real Estate Co., Ltd. It was launched in April 2022, with a total of 42 households subscribed and sold, and the total amount of supervision accounts was 50.67 million. Due to the suspension of work by the general contractor, the community was not delivered. After the intervention and coordination of the district real estate bureau and the local authorities, it was planned to activate the funds in the supervision account to start the withdrawal. As of July 29, 33 households have signed withdrawal agreements with the developer, and the remaining 9 households are coordinating with the development company.

From the suspension of construction on the property to the clear announcement that owners can cancel their contracts and get refunds, the owners of Zhujiang Four Seasons City who insisted on canceling their contracts and getting refunds have finally seen hope.

"The building has been built, but it has not been completed. Construction has been stopped and it cannot be delivered. The sales office has been evacuated." A real estate agent working near Zhujiang Four Seasons City told China News Weekly that now the government has stepped in to resolve the issue and asked developers to give full refunds to home buyers, which is also a good thing for the owners. "If you can't get the house and the money can't be refunded, it's such a sad thing."

Yan Yuejin, research director of E-House Research Institute, believes that there have been cases in the past where people have requested to return the house and get the down payment back after purchasing an unfinished building, but it was all based on personal negotiation. The reason why the Nanjing case can be considered the "first case" is that it is the first case of centralized return of the house and refund of the down payment under the active promotion and coordination of government departments in the process of "guaranteed delivery of buildings" in the past two years.

It is worth noting that according to the reply from Nanjing Jiangning Development Zone, the developer stated that only the house price will be refunded, and no mortgage loan interest compensation will be given. In the view of industry insiders, although only the down payment will be refunded without corresponding interest, it is precious for the owners to be able to get the house price back. At the same time, this case also provides a practical reference for handling suspended buildings that are difficult to "keep the delivery of buildings" at the national level.

Some industry insiders said that this approach can serve as a reference and inspiration for projects that have poor sales in the early stages and cannot be built and delivered later.

Can it be copied and promoted?

After buying a commercial property, the developer has been unable to deliver the property, and some projects have even been suspended for a long time. In this case, many buyers hope that the developer will "refund the property and return the money." However, due to various reasons, it is rare for buyers who encounter unfinished projects to actually "refund the property and return the money."

In July 2022, the Political Bureau of the CPC Central Committee proposed for the first time to "ensure the delivery of housing and stabilize people's livelihood". On May 17 this year, the national video conference on ensuring the delivery of housing proposed to "continue to adhere to the city-specific policies, fight the tough battle to deal with the risks of unfinished commercial housing, and steadily promote key tasks such as ensuring the delivery of housing and digesting the existing commercial housing". Ensuring the delivery of housing has become an important task in stabilizing the real estate market.

Therefore, the case of "check-out refund" in Nanjing Pearl River Four Seasons Joy City has attracted widespread attention. So, can this case in Nanjing be replicated and promoted?

Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, told China Newsweek that the case of Nanjing Pearl River Four Seasons City has certain special features, namely, there is a balance in the pre-sale fund supervision account, which is a prerequisite for returning the house and refunding the down payment. He said that after 2022, the government has strengthened the supervision of pre-sale funds, and this case is one of them. Therefore, it is also possible to return the house and refund the down payment.

In his opinion, the new round of guaranteed housing delivery and diversified protection of the rights and interests of owners, in addition to actively consolidating the main responsibility of developers to guarantee housing delivery, promoting the resumption of work and production of projects, and completing and delivering them, refunding the house and refunding the down payment is also an option. He said that especially for projects with low sales and large remaining unsold scale, but difficult to sell, after exhausting all means, developers can neither add funds, sell assets, nor recover the misappropriated funds. So, for such projects, it is an option to refund the house and replace it with other projects with guaranteed delivery in the surrounding or regional areas, or to refund the house and refund the down payment like Nanjing Pearl River Four Seasons City.

"These are all explorations of multi-channel solutions to advance the work of ensuring housing delivery, solve the problem of unfinished buildings, and protect the rights and interests of small property owners. They have wide applicability." Li Yujia said that for those owners who buy a house for the purpose of self-residence, they can also choose to withdraw from the house and exchange it for a surrounding project under government coordination.

Yan Yuejin believes that such operations are based on several foundations: first, the delivery of real estate projects is nowhere in sight, and even if funds are injected, delivery may be difficult; second, there is money available for refund in the pre-sale fund supervision account of the relevant real estate companies, which means there is money to be refunded; third, housing prices have fallen, and buyers can subscribe to other houses after the refund.

He told China Newsweek that this model is innovative, but whether it will be promoted in this way in the future may depend on the financial situation of the real estate developers. If the "guaranteed delivery of houses" can be smoothly promoted, then this type of house withdrawal operation will generally not be supported, especially since this type of house withdrawal involves issues such as bank loans, which are more difficult to coordinate.

Yan Yuejin believes that the lesson from this approach is that for some deliveries that are difficult, local governments should pay timely attention, sort out the problems, and actively promote their resolution.

He said that solving this type of housing problem is actually an important measure to "revitalize existing housing and optimize incremental housing", and it also inspires the revitalization of unfinished buildings or projects under construction. At the same time, if all such projects are returned, it will actually help to combine with the "purchase instead of construction" model currently mentioned in various places, that is, local governments purchase and use them as affordable housing projects.

According to industry insiders, the key to this practice is that there is money in the escrow account that can be refunded. Wang Yuchen, director of Beijing Jinsu Law Firm, mentioned that many unfinished building projects have been suspended for many years, and the pre-sale house funds in the escrow account have long disappeared. This means that whether the government coordinates or the home buyers sue, as long as there is not enough money in the developer's account, it will be very difficult to get the house money back in the end.

Yu Xiaoyu, research director of E-House Think Tank, believes that the collective room withdrawal approach is suitable for real estate projects with low sales, where regulatory funds cannot cover the delivery of the project and there are not many buyers in the early stages, so the room withdrawal amount can be covered. In terms of the comparison between regulatory funds covering room withdrawal amounts and construction funds, a more easily achievable approach has been chosen.

Li Yujia mentioned that for projects before this, if the pre-sale funds were misappropriated and could not be recovered, and sales were relatively low, measures such as returning the house to other projects could be adopted. At the same time, bankruptcy liquidation would be initiated for the project, and the liquidation funds would be used to prioritize the replacement projects.

In Li Yujia's view, whether it is to implement funds to promote resumption of work and delivery, or to return the house to other projects, or to return the house and refund the down payment, it is necessary to strengthen the local government's territorial responsibility, the developer's main responsibility and the financial institution's support responsibility. Only by the joint efforts of the three parties can the rights and interests of the owners be effectively protected.

Author: Sun Xiaobo