Yanzi Valley of Jingcheng

Chapter 275

In China, real estate developers are very good at playing empty hands.

The developer will first get a loan from the bank to acquire the land, and then pay a little upfront cost to start the project. The construction of the building is outsourced to the engineering party. Many real estate developers require the engineering party to advance the money and contribute. Continue to build, and pay the engineering party in batches while building, until the entire building is sold, the engineering party can receive the final payment of the settlement.

This kind of business model is doomed for real estate developers to borrow more and more money in order to expand their market share. As long as they can market and pass the quality inspection, there will be no major troubles.

Therefore, high debt is a common feature of the entire industry, and Guanhong Real Estate is no exception.

The crisis of Guanhong Real Estate comes from the "three red lines" issued by the government not long ago.

The "three red lines" specifically refer to:
1. The asset-liability ratio of real estate enterprises after excluding advance receipts shall not exceed 70%;

2. The net debt ratio shall not exceed 100%;

3. The short-term cash-to-debt ratio is not less than 1 times.

The significance of the "three red lines" is to reduce the capital leverage of real estate companies, thereby reducing their operating risks and ensuring the stable operation of the real estate industry.

If we compare a domestic real estate company to a person, this person often borrows money from relatives and friends in order to build a house in a hurry, always overdraws his credit card, and there is not much cash left in the savings card, and his consumption and investment are very aggressive.

This person didn't want to do it, but when everyone else in the market is doing it, he has to do it. At this time, the parents have to come out to control these children, set a standard for everyone, and let them guarantee The adequacy ratio of cash in the account allows them to borrow more money to restrain themselves. They always play with fire and one day they will burn themselves.

Whether you are a person or a business, you must have a sense of risk and a bottom line for your business.

According to the number of "crossing the line", the regulators divide real estate companies into four categories of "red orange yellow green" and determine the upper limit of their interest-bearing liabilities when financing.

For green housing enterprises that have not “crossed the line”, the annual growth rate of interest-bearing liabilities is capped at 15%;

For real estate companies with yellow (one indicator crossing the line) and orange (two indicators crossing the line), the annual growth rate limit of interest-bearing liabilities is 10% and 5%;

Real estate companies in red (all three indicators are above the line) cannot add new interest-bearing debts.

Guanhong Real Estate belongs to yellow, one indicator crosses the line, and its cash-short-to-debt ratio is less than 1 times.

Cash short-term debt ratio = monetary funds / short-term liabilities at the end of the reporting period × 100%.

If the indicator is greater than 1, it means that the monetary funds on the enterprise's account are greater than the short-term liabilities, and there is no short-term debt risk.

The larger the cash short-term debt ratio, the stronger the short-term debt repayment ability of the enterprise.

"Currently, the ratio of cash to short-term debt in our Guan Hong Real Estate account is less than 1, which is beyond the line." Guan Hongwei emphasized to Guan Sha, "Dad is so headache that he doesn't know where to get cash. How can I give you money at this time?"

"Dad...you are too aggressive in doing business like this..." Guan Sha said.

"Hey, how long has it been since you started your business? I've educated my dad, come here! Why don't you take this seat!" Guan Hongwei was furious, "Loans are financial resources. As long as you can borrow, of course, the more The better, and it’s not that you don’t have the ability to develop, you don’t borrow much money from others, it’s the same from 02 to last year, this is a financial bonus, the bonus must be seized, and you must grab it, do you understand?”

What Guan Hongwei said is the truth. Since all real estate companies want to enjoy financial dividends, they will frantically borrow from banks to acquire land and build buildings. Unknowingly, too much money in the banking system is occupied by real estate, which squeezes the real economy (non-real estate) The pressure can be imagined.

When an unreasonable phenomenon is interpreted to the extreme, the country will inevitably take corresponding measures.

Guan Hong Real Estate is facing considerable pressure to reduce debts. Guan Hongwei has to reduce short-term debts or increase the cash ratio, but this year the real estate market has been cold, and the speed of cash return is slow. If there is not enough cash, how can we get the money to pay off debts?How to increase the cash short-term debt ratio if the debt cannot be repaid?

Guan Hongwei was worrying about this matter, and when he heard his daughter asking for money, he naturally felt even worse.

In all fairness, Guan Hongwei also wants to help Guan Sha. He is actually far less cruel than he says, but he can do nothing. All the funds that can be used by the Guan family have been invested in Guan Hong Real Estate, but the gap still exists. If it is not made up, the future development speed of the group will be greatly restricted.

"Our family is yellow, which means that the growth rate of interest-bearing debt next year can only be 10%. To put it bluntly, the less money you have, the less you will be allowed to borrow money. The growth rate of other people's 'green' is allowed to be 15%, a difference of 5%. The things we can do are completely different, if we don’t quickly find a way to turn green, we will definitely be eaten by those “green companies” in a short time, and this industry will become more and more concentrated in the head.”

Guan Sha swallowed, she was afraid of the problems her father was facing, and she was afraid because she was helpless.

"Now we just need to find a way to increase the cash in the account, and if it exceeds the short-term debt, we can turn green?" Guan Sha asked.

"Yes, so Dad really can't save you this time. How many people do you have in your company, and how many people do they have in Jinquan Qingyang Branch? The total number of you is less than 500 people. Our Guanhong Real Estate is carrying a lot of money. Employment for thousands of people... Before you came to Qingyang, your father warned you that starting a business is like swimming. If you want to enter the water, you must first ensure that you can swim. If you can't swim but still want to go, you have to think Do everything you can to save yourself, otherwise you will have to pay for your impulsiveness and ignorance."

After Guan Sha put down the phone, she stood in front of the window, staring blankly at the boundless night.

The less money you have, the less you can borrow money;

The less you can borrow money, the less you can develop rapidly;
The less rapid development is, the size and scale will be quickly pulled away by competitors...

Regarding the three red lines, if Guanhong Real Estate does not act, it will lose the whole game with a high probability in the end. This is the future competition trend of real estate companies.

The big fish eat the small fish, and the strong will always be strong.

Guan Sha clenched her fists. She wanted to help her father, even if it was only a small amount, but...how should she help?

"What I heard is that even if banks don't draw loans for real estate companies, they basically don't continue to do so." Ren Tianxing said, "Your father is already very cautious, I heard that there are many private real estate companies that have stepped on all three red lines. "

"I know this best." Du Jing said, "When we looked at the real estate in the second half of last year, many developers had already said that the house would not be handed over until 2025, but the money must be paid now. In fact, they are constantly selling off-plan houses to recover blood. "

"It won't last long, right?" Guan Sha asked, "If they stepped on the three red lines... I guess the cash collected from selling off-plan houses can only meet short-term liabilities. If the overall leverage ratio does not drop, the red line will still be stepped on. Whether off-plan housing can be completed on time is a problem.”

"That's why we at Jingyi didn't recommend customers to buy off-plan houses before. Although off-plan houses have a high potential for appreciation, our experts felt that the risk was too high when we held internal meetings." Du Jing said, "In the future, the debt default problem of real estate companies will definitely increase. The more serious it is, from the end of last year to the beginning of this year, most of the houses we promoted were second-hand houses, and we thought that we would avoid a thunderstorm for customers, but now the second-hand houses suddenly cannot be sold!"

Speaking of this, Du Jing felt aggrieved and anxious, until now she didn't think there was anything wrong with what she did.

Jingyi is indeed dedicated to helping customers find reliable communities that can appreciate in value, and has indeed helped many people find suitable just-needed houses. Of course, at the same time, she has also stumbled many real estate speculators who are eager to sell.

At this moment, Xiao Qianxing suddenly rushed out of the room, "Girl, have you read the news?!"

Everyone was puzzled, Guan Sha asked, "What news?"

"We have a tax discount for renting companies! It has been reduced from 5 points to 1.5 points! It's all on the hot search!" Xiao Qianxing was so excited that she wanted to cry. How could she not know the pressure on Xiao Jie and Guan Sha during this time? She thought Help, but she doesn't know how to help, so she can only check the news every day to see what preferential policies are available. Originally, she didn't have much hope for this, but today she really found out a huge benefit.

Guan Sha took Xiao Qianxing's mobile phone and looked at it. The main content of the news is as follows: From October 2021, 10, housing leasing companies will apply a simple tax calculation method to rent out housing to individuals, and pay value-added tax at a reduced 1% rate based on the 5% levy rate.

"This... this means..." Guan Sha's tongue trembled a little.

"This means that the cost of your Yanzigu apartment can be directly reduced by 3.5%! This 3.5% is given to you by the state!" Ren Tianxing slapped the table and stood up. If the 10% is paid out, as long as the implementation is smooth, the total cost will be saved by 13.5%. With this profit rate, you will no longer be afraid of being criticized as a long-term rental business! The company’s valuation must also be revalued! Higher estimates! "

After listening, everyone wept with joy. 3.5% may be an insignificant number in mathematics, but it can greatly increase the safety cushion of an enterprise's operations.

Du Jing was sincerely happy for Guan Sha, but after she was happy, thinking of herself, she became depressed again, "Is there anyone to help me figure out a solution? What should I do? How should I deal with those people?"

Only then did Guan Sha and Ren Tianxing calm down, thinking that they really should help Du Jing, she couldn't hide in Yanzi Valley for a lifetime.

"The ones who come to harass you are definitely not 'just needed' but those real estate speculators. Only real estate speculators will want to quickly sell second-hand houses to cash in."

"Yes! That's them!" Du Jing nodded, "Whoever looks for me in 'just-needed', the 'just-needed' people's house is their own, and if they can't sell it in a short time, they can't sell it. Most people can't sell it within five years I don’t even think about changing houses, who knows after five years, maybe the market will recover and liquidity will come back, all the real estate speculators who knocked on my door, to be honest, I think they deserve it right now!”

Ren Tianxing rubbed his chin, "They just want money, they have to find a way to solve their financial problems, you..." Before Ren Tianxing finished speaking, Guan Sha interrupted, "I figured it out! I figured out a way Damn it, why didn't I think of it before!" Guan Sha looked at Du Jing with glowing eyes, "This method can save you as well as me!"

(End of this chapter)