Study On Deleveraging Of Real Estate Enterprises

The real estate industry plays a pivotal role in China’s economy and,as a pillar industry,has a profound impact on the development of the Chinese economy.In particular,in recent years,housing prices have continued to rise and a large amount of capital has continued to flow in.In order to avoid the bubble of the real estate economy,the state has introduced relevant policies to regulate it,from restrictions on purchases to restrictions on prices,and then to the tightening of lending policies by major financial institutions,all of which have made the industry environment more complex.Against this backdrop,real estate companies have also had to make adjustments to meet the requirements of the new era.At the same time,the real estate development business itself is characterised by high risks,large investments,slow returns and greater influence by policies,which undoubtedly makes it a more difficult challenge for real estate enterprises.The growth model of rapid expansion of enterprise scale with the help of high leverage is no longer suitable for the current stage,and high leverage will increase the financial risk of enterprises and affect their ability to continue operation.At present,most real estate enterprises in China are facing serious cash flow problems,and high leverage is one of the main causes of debt crisis and bankruptcy of these enterprises.Therefore,it is crucial to study the deleveraging path of real estate enterprises in order for them to comply with the current market environment and enhance their competitiveness.This thesis examines the deleveraging pathway and its effectiveness for the case company Jinke.The specific ways of deleveraging include: speeding up the turnover of capital,improving the quality of sales and speeding up the return to secure cash flow;reducing the need for debt financing through innovative financing methods in the form of asset securitisation and spin-off listing of subsidiaries;increasing the total owner’s equity of the enterprise by issuing perpetual bonds,strengthening profitability and increasing retained earnings.Through the combined effect of the above methods,the growth of interest-bearing liabilities of Jinke has been controlled,the total amount of debt has been reduced,the gearing ratio and net debt ratio have dropped significantly and are gradually lower than the industry average,the ratio of cash to short term debt has been steadily increased,and the solvency of the enterprise has been significantly strengthened;the capital management of the enterprise has been improved,the monetary capital of the enterprise has been increased,the liquidity of assets has been strengthened,and the external financing pressure of the enterprise has been eased;the profitability has been strengthened.The profitability of the company has been strengthened and the development prospect of the company is good.Although the deleveraging of Jinke shares is effective,there are also some problems,such as "explicit shares but real debts" and hidden liabilities arising from guarantees,to which Jinke shares should pay attention.In order for Jinke to better complete the deleveraging task,this thesis also puts forward suggestions to strengthen cost management,increase equity financing and improve the guarantee mechanism.Finally,the thesis suggests that real estate enterprises should expand market financing channels,enhance profitability and endogenous financing ability,change business models and adhere to sustainable development,and that the government should strengthen policy guidance,in the hope of providing some experience for other companies in the real estate industry to de-leverage,thereby promoting the sound development and smooth deleveraging of domestic real estate enterprises.