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40 developers trapped in 600b yuan debt

Updated: 2011-03-21 16:58

By Cai Muyuan (chinadaily.com.cn)

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Forty Chinese property developers have more than 600 billion yuan in combined debt, Guangzhou Daily reported on Monday.

Though the red hot property market has recently cooled, many enterprises are still struggling with debt. The property developers will be in a worse position when central bank raised the deposit reserve rate to a record high, according to the newspaper.

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The debt surge increased the developer's financial costs. Assuming the future interest cost remains unchanged, it will still take the developers more than 20 years to pay off the debt even if they don’t spend a penny of their revenues, one market analyst told the newspaper.

"If the developers lose their sources of loans, they will collapse very soon," said Han Baojiang, a professor from the Central Party School of the Communist Party of China.

Net profits of the 40 parent property companies totaled 29.86 billion yuan, according to research. That's an increase of 37.88 percent year-on-year.

Analysts estimate that it may take two or three months for property developers to reduce housing prices, the newspaper reported.

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