Yes, this is what property developers of China have been advertising for a while now! Chinese developers are ready to accept garlic, wheat, watermelon, and other agricultural produce as a down payment for homes.
This is indeed an unheard type of barter for the 21st century. Houses in China have become highly unaffordable. And hence, Henan-based property developer Central China came up with this enticing scheme where buyers can now book homes by paying in wheat and garlic for up to $23,900.22! In a way, this new policy attracts farmers to purchase homes for themselves.
You would be surprised to know that this advertisement gained an overwhelming response. It attracted over 852 visits and 30 transactions involving 8,60,000 catties (1 catty =0.6 KG) of garlic in just 16 days!
But, Why Did Central China Come Up With This Policy?
We all remember China’s Evergrande Group, right? It is the second largest property developer in China, which sent chills to China’s real estate market when it defaulted on its debt repayment. All of this happened because the property prices were so inflated that an average person could not even imagine buying a house.
There were more than 65 million unsold and empty houses in China! Yes, you heard that right. Developers had built homes by taking loans, but there were no buyers and sales. This was a major threat to the Chinese real estate market.
Looking that citizens could not afford homes, The People’s Bank of China cut the minimum interest rate for first-home buyers’ to 4.4%, down from 4.6%.
But that too showed no to low effect.
Central China Real Estate, the property developer, now accepting garlic as a down payment, recorded a 71.3% plunge in May sales from a year ago. Somehow, they are trying to sell houses in cash or kind.
But before such crises hit the news, there were early signs that China ignored!
- Rising construction costs
- Inflated property prices
Is India Along The Same Line?
1. Construction Cost is Inflating in India
2. Property Rates are Rising
What Lies Ahead?
When we say property prices are unaffordable, it means that the price-to-income ratio is way too high.
If we look at the price-to-income ratio of Beijing (a tier-1 city in China) vs Mumbai (a tier-1 city in India), Beijing’s price-to-income ratio is more than double that of Mumbai. Moreover, the gross rental yield of Mumbai is much higher than that of Beijing.
So, it is safe to say that, even if the prices of raw materials are inflating and the price of real estate is rising, our condition is nowhere close to what China is facing today.
That’s it for today.
Until then… Don’t forget to share this article with your friends.