Research On The Mode Of Financing Under Credit Crunch Circumstances

Real estate has become a pillar industry of China,which confers it a crucial role over Chinese economy and people’s livelihood.In consideration of its capitalintensive characteristics,real estate projects tend to have large demand of funds,which means the enterprises will need financing as they do not have enough fund by their own.In the meantime,under credit crunch circumstances over real estate industry in recent years,financing conditions have become more difficult and rougher.Hence,suitable,scientific mode of financing hugely influences the sustainability or success of real estate project.The thesis deals with real estate financing based on the case analysis of ZH Group T Project in terms of financing modes,concerns and causes.The project’s asset amount is 26.24 billion,combined with 6.56 billion of equity and 19.70 billion of debt.In the meanwhile,80%of the equity amount being about 2 billion is classified as equity but effectively like debt.ZH Group suffers great financing and payment pressure and is difficult with abundant or sustainable cashflow.It is attribute to three causes.Firstly,the cause means to be an unbalanced capital structure.The group faces huge pressure of solvency in terms of a great percentage of debt.Secondly,a high degree of funding cost.It further enlarges the solvency pressure the group suffered as mainly financing mode is from high-cost private funding.Finally,unpleased cashflow degree.The unfavorable presell outcome far from expectation brings unabundant cashflow for debt payment.Several measures are found to solve the project’s funding concerns and avoid similar situations for the industry.Firstly,maintain a reasonable capital structure,a considerable self-owned capital and avoid the unbalanced capital structure overall.Secondly,heighten funding risk awareness and keep the financing cost at a modest degree to save enterprises from much high burden of payment.Thirdly,enlarge the project’s cashflow amount and endeavor to a pleased presell result.Finally,increase credit guarantee to enhance the probability to enquire project loan from commercial banks.The above measures may provide relevant enterprises guidance and experience.