NEW DELHI: The over-leveraged Chinese real estate market has begun to unravel with another developer, Fantasia Holdings Group, failing to repay $206 million debt this week.
This triggered a slew of rating downgrades of real estate debt papers and created panic among investors.
Experts are keeping a close tab on a dozen real estate firms, which are up for debt repayment by the end of this year.
The next in line are Xinyuan Real Estate Co, which has a $229 million debt repayment due on October 15 and Central China Real Estate, which is supposed to repay a $400 million bond on November 8.
The default by Fantasia Holdings comes close on the heels of Evergrande missing interest payment of $83 million on September 24.
Evergrande has a total debt of $300 billion. Experts fear another default by a realty firm in China may trigger a domino effect leading to a global financial crisis of the magnitude of Lehman Brothers in 2008, which wiped off bond and equity markets across the world.
The effect has already started showing. After an impressive run over the past 18 months, Indian equity markets are now cautious with China remaining an immediate risk.
“Asian equities have seen heavy foreign outflows since the start of this month on concerns about China’s property sector,” said Deepak Jasani, head of retail research, HDFC Securities.
Bond yields have also inched up on fear of widespread defaults by Chinese firms. China recorded corporate bond defaults worth $9.68 billion in the first half of this year.