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2022-08-25 08:34:07

SHAANXI, Northwest China — Wang Xudong and Zhou Zongzhen pick their way through the darkness toward their home: a half-finished apartment block on the outskirts of Xi’an.

The 33-story building is little more than a concrete skeleton. Its façade hangs open, the brick walls connecting the columns only half-built. Plastic tarpaulins flap against the scaffolding in the late evening breeze.

For the couple, the complex — with its clouds of dust and musty smell of concrete — is barely distinguishable from the construction site where they worked during the day. The only difference is that it’s much cooler now. The wind whistles through the long hallway, taking away the heat.

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Wang and Zhou have occupied one of the empty units on the fourth floor. There is no running water or electricity, a single solar lamp providing the sole illumination. The only furniture consists of two single iron beds pushed against one wall, and an unpainted wooden board serving as a makeshift table.

But the pair, who are both 60 years old, have resolved to put up with the basic conditions. They feel they have no other choice.

“Although life is rudimentary here, we no longer have to worry about the monthly rent,” Wang tells Sixth Tone. “We bought it. We own it. It’s our home.”

Wang, Zhou, and nearly 100 other homeowners moved into the unfinished apartment compound — Jinling Apartment — just over three months ago. It was an act born of desperation and defiance.

Although life is rudimentary here, we no longer have to worry about the monthly rent.

Like thousands of others in China, they have poured their savings into buying a presale apartment — only to see the developer fall into financial difficulties and halt construction on the project.

Presales have become standard practice in China. In 2021, 87% of new homes in the country were sold while still under construction, up from 63% in 2005. Most buyers pay for their apartments months — or even years — before they are finished.

The model has supercharged China’s property market, enabling developers to finance massive amounts of construction. But now, the real estate sector is facing a financial crunch. Across the country, developers are struggling to service eye-watering debts, and bringing projects to an abrupt standstill.

As much as 5% of new residential developments in China’s major cities — or 71.5 million square meters of apartments — are in limbo as a result, the Shanghai Yiju Real Estate Research Institute found in a survey conducted during the first half of 2022.

The crisis is leaving buyers in a dire situation. Many are paying mortgages on properties that are still empty shells. Others have poured their life savings into a down payment on a home that may never be completed.

Jinling Apartment is an example of how desperate things can become — and how difficult it can be for homeowners to protect their rights. 

Wang, Zhou, and the other homeowners have been waiting for the developers to deliver their homes for over five years. They have tried pleading with the companies to complete the construction, asking the authorities to intervene, and taking the firms to court. None of it has worked.

Meanwhile, China’s economic slowdown has left many of the buyers struggling to find work and make rent. With few other options, they’ve been driven to squat inside their half-finished homes.

Zhou Zongzhen (left) and Wang Xudong (right) sit in their bedroom inside an unfinished building, in Xi’an, Shaanxi province, August 2022. Wu Huiyuan/Sixth Tone

Zhou Zongzhen (left) and Wang Xudong (right) sit in their bedroom inside an unfinished building, in Xi’an, Shaanxi province, August 2022. Wu Huiyuan/Sixth Tone

Left in limbo

Wang and Zhou first heard about the Jinling Apartment development in 2016. Created by two local developers — Xi’an Huayue Industrial and Xi’an Ronglang Real Estate — the complex sits amid a tranche of farmland several kilometers south of downtown Xi’an.

The project quickly attracted the attention of migrant workers living in nearby urban villages, the densely populated settlements that sprang up around Xi’an during the height of China’s economic boom. Jinling Apartment appeared to offer exactly what they needed: a modern home at an affordable price.

Wang, who rented a place in one of these urban villages, was desperate to buy a home near Xi’an. His elderly parents, who live several hundred kilometers away in the mountains of southern Shaanxi province, would soon no longer be able to take care of themselves.

“My father is over 80 years old and my mother is blind. I had tried to take them to the city with me, but no one would rent a house to us,” says Wang. “Landlords worry that if an elderly person dies in the house, it’ll affect their ability to rent it out again.”

My father is over 80 years old and my mother is blind. I had tried to take them to the city with me, but no one would rent a house to us.

In November 2016, Wang visited the sales center at Jinling Apartment. The staff told him that a 50-square-meter apartment would cost 250,000 yuan (then $37,600), and that the building would be completed in one year. Wang, who has spent years working in construction, thought the delivery date was reasonable at the time.

“The building was capped,” says Wang. “The scaffolding on the roof was dismantled.”

A few days later, Wang and his wife were told that they had to pay 60% of the 250,000 yuan upfront to secure a mortgage. They handed over the money. When their mortgage application failed, the staff told them they could simply pay the remaining 40% when the apartment was ready in a year’s time — a common arrangement in lower-income parts of China.

Wang managed to raise the required sum over the following months. But when he went to visit Jinling Apartment a month before the handover date, he found the site was deserted.

“The three elevators, windows, and water pipes were waiting to be installed,” Wang says. “But there were no workers.”

In October 2017, two weeks before the handover deadline, one of the developers issued a notice stating that construction had been suspended due to “a breakage in the project funding chain.” It added that it was “raising funds from various sources to pay for the project, and the construction unit will fully resume work this week.” The developers promised to hand over the finished homes by Jan. 31, 2018.

They did not.

Now seriously worried, the buyers began getting organized. Wang said they made “countless” visits to the local housing authorities, asking them to intervene.

Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

In August 2018, the developers came back with a new proposal. They asked the buyers to pay them the remaining balance on the apartment price, arguing this would give them enough capital to restart construction.

The developers promised the payments would go into a government-supervised escrow account. Local officials also came forward to reassure the buyers that the money would be handled properly. 

The buyers reluctantly agreed. Over the following weeks, they handed over more than 9 million yuan. Wang paid the final 40% of the 250,000 yuan, borrowing money from relatives and taking out a 70,000 yuan loan from rural banks to fund the payment.

Construction did resume — for one week.

A dozen workers arrived to add the insulation layer to the building’s outer wall, and hundreds more window glass panes were delivered to the site, according to Wang. But before the windows could be installed, the workers had disappeared again.

“I felt cheated,” says Wang.

Wang Xudong (left) and Zhou Zongzhen (right) look out of their bedroom, August 2022. Wu Huiyuan/Sixth Tone

Wang Xudong (left) and Zhou Zongzhen (right) look out of their bedroom, August 2022. Wu Huiyuan/Sixth Tone

Going to court

The homeowners’ next move was to take the developers to court. In January 2020, Wang sued Huayue, the developer who received his money, for breach of contract. He paid a local lawyer 3,500 yuan to represent him, and demanded Huayue resume construction, set a new handover date, and pay damages for the disruption the delay had caused him.

Wang won the case. The court ordered Huayue to pay damages worth one ten-thousandth of the apartment price, multiplied by the number of days the completion had been delayed — around 15,000 yuan in total. But, crucially, the judgment didn’t require the developer to finish construction by a specified date.

Ten other homeowners who spoke with Sixth Tone said they had sued the Jinling Apartment developers, receiving similar verdicts. Yet their victory made almost no difference. Two years later, none of them have a finished home — or any of the damages awarded to them.

“The court said executing the judgment can wait until the developer has the capital in its account,” Wang says.

Lawyers and property industry insiders told Sixth Tone that the case is unlikely to be resolved through the courts. The local government will need to intervene directly, they suggested.

“In this case, the local government should push the unfinished development into bankruptcy proceedings,” says Qiu Ping, a lawyer at the Shanghai Brilliance Law Firm.

Construction materials can still be seen all over the Jinling Apartment complex. Wu Huiyuan/Sixth Tone

Construction materials can still be seen all over the Jinling Apartment complex. Wu Huiyuan/Sixth Tone

Once the company declares bankruptcy, its assets can be sold off through an auction, Qiu explains. Another developer can then — in theory, at least — take over the project, finish the work on the apartments, and sell the unsold units. Buyers who have prepaid for the apartments, like Wang, are legally the owners of their homes, so they will retain ownership even after the developer goes bankrupt, Qiu adds.

“Initiating bankruptcy proceedings is not simply about solving the problem through auction, but using the efforts of all parties to revive the unfinished building to protect the interests of creditors and maintain social stability to the greatest extent,” says Qiu.

However, a real estate investment analyst told Sixth Tone that sometimes it’s not only a matter of seeking funds to complete the construction; in some cases, projects stall because the land is no longer profitable for the developers. 

In the case of Jinling Apartment, there are only 60 remaining unsold units, while the buyers have already paid for their apartments in full. That means there would be limited opportunities for any company taking over the project to make money once it’s completed.

“Companies might lose the incentive to seek funds to resume this project,” says the analyst, who requested anonymity due to the sensitivity of the topic. “The government might have to rescue the market by buying the land at a price that is high enough to complete the project.”

A resident looks out from his apartment inside Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

A resident looks out from his apartment inside Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

Break-in

The five-year delay has caused the buyers an enormous amount of stress and financial hardship. Many have tried to rent homes close to Jinling Apartment, so they can keep an eye on the development. But the area has undergone waves of demolitions, as Xi’an redevelops the urban villages.

Wang has had to move house at least six times during the past three years as a result. Of the 10 homeowners Sixth Tone spoke with, six of them said they’d had to move a similar number of times.

“The surrounding rural houses have been demolished everywhere in recent years,” says Wang. “I’d relocate, then the new place would get demolished.”

When I bought this home, I thought I could have a nest of my own after getting divorced. But the reality is I have been drifting around all these years.

Song Jia, 45, bought one of the units inside Jinling Apartment shortly after getting divorced. During the initial disputes with the developers, she was living in an urban village across town. Each time the homeowners met at the development, she had to travel for six hours, changing buses twice. Later, she moved closer, but she has also had to move multiple times due to the sweeping redevelopment. The stress has taken a heavy toll on Song, who spoke with Sixth Tone using a pseudonym for privacy reasons.

“When I bought this home, I thought that instead of renting a house I could have a nest of my own after getting divorced. But the reality is I have been drifting around all these years,” says Song, bursting into tears. “No one knew the road ahead would be so difficult. Every time I want to cry, I pretend to laugh.”

Over time, the financial pressure has also grown. As the neighborhood has gentrified, rent levels have kept rising. Meanwhile, the local economy has taken a big hit during the pandemic.

Most of the homeowners work in construction or the service sector, and have seen their income decrease significantly due to repeated lockdowns. During Xi’an’s three-month lockdown in late 2021, many earned nothing at all.

Song Jia in her bedroom, August 2022. Wu Huiyuan/Sixth Tone

Song Jia in her bedroom, August 2022. Wu Huiyuan/Sixth Tone

Eventually, the buyers came to a sobering conclusion: The need to save money now outweighed the inconvenience of living in an unfinished building. In September 2021, over 100 homeowners broke into Jinling Apartment, smashing down the brick walls blocking the entrance and the stairwell.

“We picked up a large steel pipe from the construction site, and used it to knock open the bricks,” says Wang.

The police soon arrived, and began firing tear gas into the building to force the homeowners to leave.

“Most people couldn’t take it and fled outside,” says Wang. “But I stayed indoors and continued knocking open the stairwell.”

Later that day, an official from the local housing bureau came to the site. He promised to ensure the project was completed by the end of the year if the buyers agreed to leave, according to a video recording of the incident seen by Sixth Tone.

The homeowners chose to believe him, and left. But construction didn’t resume.

So, in May this year, they broke into the building once again. This time, the developers had left a car blocking the entrance, which prevented the homeowners from moving in their furniture. The police refused to tow the vehicle away, so several dozen homeowners lifted the car with their bare hands and moved it out of the way.

Children play inside Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

Children play inside Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

Life in a half-finished building

Residents moving into unfinished apartment blocks is rare in China, but not unheard of. Earlier this year, hundreds of people broke into Yihefang — another stalled project in Xi’an.

For the residents of Jinling Apartment, life in the building has been inconvenient, but tolerable. Many of them grew up in poverty, and are used to coping with poor living conditions.

“Tough? We’re all people who have experienced bitterness,” says Song. “This house is much better than the village house (I was renting before). I was afraid the village house was on the verge of collapse.”

A 67-year-old homeowner, surnamed Qu, echoed this point. “Before China’s reform and opening-up, everyone in the countryside lived a hard life,” he says. “Now, even though I’m a little miserable, I’m satisfied.”

Qu rests in his room inside Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

Qu rests in his room inside Jinling Apartment, August 2022. Wu Huiyuan/Sixth Tone

In some ways, life in Jinling Apartment reminds the residents of their time in the countryside. They have formed a close-knit community, working together to solve problems.

No drainage system? Dig a dry toilet outside the building. No tap water? Draw water from a well 200 meters away, and transport it back on a trolley. Some residents also go around collecting half-empty bottles of mineral water from local trash cans, as they know it’s a bad idea to drink the groundwater.

In the evenings, women take turns cooking a meal for the whole building, using a shared kitchen on the first floor. The residents each chip in 400 yuan a month to cover the costs, Qu says. 

Summer is almost over, winter is coming. We have no windows, let alone heating.

Qu finds this communal style of life oddly comforting. He spends most of his day in the common area in the building’s lobby. While the adults sit together on a huge sofa, planning future demonstrations, the children play together on a mattress covered by a bamboo mat.

“My neighbors take good care of me and cook for me,” says Qu.

Yet the homeowners remain anxious. The future of the project is still uncertain. In July, local officials told the residents that they would help Huayue sell a small tranche of land to raise enough funds to finish the building, according to video recordings of the meeting homeowners shared with Sixth Tone. Both developers have promised to resume the work as soon as they have enough money. Sixth Tone’s calls to the housing and urban-rural development bureau in Xi’an’s Gaoxin District, where Jinling Apartment is located, went unanswered.

The residents have grown tired of promises. Qu says he sometimes struggles to sleep at night, tortured by the idea that he has “been fooled.”

“I was willing to do all kinds of hard and dirty work during the first half of my life. The idea was that no matter how hard I worked, I had to buy a flat in the city,” says Qu, who grew up in a mountainous part of Shaanxi with scant health care resources. “The fate of this home will determine my whole life. I bought it because I hope to spend the rest of my life here … I’m very distressed.”

Qu (center, in white) and other residents enjoy the cool air outside, August 2022. Wu Huiyuan/Sixth Tone

Qu (center, in white) and other residents enjoy the cool air outside, August 2022. Wu Huiyuan/Sixth Tone

After dark, Qu likes to move the stools outside. It’s still baking hot in Xi’an, and the cool air is pleasant. But the residents know that the weather will soon change.

“Summer is almost over, winter is coming,” says Qu. “We have no windows, let alone heating. I hope the government will solve this problem for us as soon as possible.”

Editor: Dominic Morgan.

(Header image: Wang Shuting (pseudonym), a full-time mother with three kids, stands in her apartment inside an unfinished building, in Xi’an, Shaanxi province, August 2022. Wu Huiyuan/Sixth Tone)