• Some Chinese property developers accept crops as down payments to help boost sales.
  • People can pay up to $23,900 down payment using wheat, priced at $0.30 per 21 ounces.

In ChinaIn a depressed real estate market, desperate developers accept wheat and garlic as down payments for rural properties to boost sales.

The alternative payment method comes as analysts expect property sales in China to have fallen 25% from January to June as part of China’s zero-Covid strategy, according to Reuters.

Chinese citizens are also hesitant to invest in real estate, preferring to hoard cash amid China’s uncertain economic climate, Bloomberg reported in May.

To boost sales, property developer Central China Immovable is offering an “exchange wheat for house” promotion for homes in Minquan County, Henan Province, CNN reported, referring to a now-deleted ad on the company’s official WeChat account. Priced at 2 Chinese yuan ($0.30) for each catty (21 ounces), buyers can pay up to 160,000 yuan ($23,900) of their down payment with wheat. Home prices in the development range from 600,000 yuan ($89,550) to 900,000 yuan ($134,300).

The promotion will end on July 10 and is aimed at farmers in the area, an agent from Central China Real Estate told Business Standard.

The company is no stranger to launching marketing campaigns targeting farmers. At the start of the garlic season in China in May, the company accepted garlic as payment for another project in Henan province, according to the development’s official Wechat account.

“On the occasion of the new garlic season, the company has made a firm decision for the benefit of garlic growers in Qi County,” the company wrote in the WeChat post. “We help farmers with love and make it easy for them to buy a house,” he added.

Central China Real Estate fell 40.4% in net profit in 2021, according to the company’s 2021 annual investor relations report. The company did not immediately respond to Insider’s request for comment.

The marketing strategy is not limited to just one developer: Two other developers in eastern Chinese cities, Nanjing and Wuxi, were accepting watermelons and peaches from farmers, according to state media China News Weekly.

Defaults by Chinese property developers rekindle fears of contagion to financial markets

Gloom in buyer sentiment is heightening tensions for Chinese property companies, with another major property developer defaulting on debt. On Sunday, the Shimao Group announced that it had missed interest and principal payments on $1 billion of offshore bonds due the same day.

“Due to the significant changes in the macroeconomic environment of the real estate sector in China since the second half of 2021 and the impact of COVID-19, the Group has experienced a notable decline in its contract sales in recent months,” wrote Shimao in a Deposit on the Hong Kong Stock Exchange. Sales in value fell 72% in the first five months of 2022 compared to the same period in 2021, contributing to the company’s liquidity crunch, Shimao added.

Other Chinese developers that have also defaulted on their dollar bonds since December 2021 include Evergrande, Kaisa Group and Sunac China. The liquidity crunch began after Beijing clamped down on excessive borrowing by property developers.

Evergrande was the first major Chinese property developer to default on its debt. This has spread to other companies as banks have tightened lending industry-wide, sparking fears of a domino effect on China’s financial sector – and the rest of the world.

The Chinese government has stepped in to manage the Evergrande crisis, but with more Chinese property companies defaulting recently, fears of contagion are resurfacing among investors. Dutch bank ING expects more defaults on property developer bonds in the second half of 2022 and into 2023, Iris Pang, its chief economist for Greater China, wrote last week.

That’s even though home sales have recently improved after Beijing pledged in March to support the housing market. Property sales in China in May fell 31.8% year-on-year – an improvement from April’s 39% plunge, according to Reuters calculations using official statistics.

“While this is a positive development for home sales, it is not a positive for property developers who have defaulted on their bonds, whether onshore or overseas, as potential buyers will stay away. ‘gap away from homes sold by these developers to avoid non-completion risk and after-sales property management risk,’ Pang wrote.

“With developer debt stress expected to persist, authorities will likely continue to focus on increasing home sales to stabilize conditions by year-end rather than resorting to developer bailouts” , wrote analysts at Eurasia Group, a risk advisory firm, in a note on June 24.

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