China developers' funding source at risk in sales crackdown

China's debt-laden developers face a potentially devastating blow to their biggest source of financing, as authorities consider putting an end to the practice of selling apartments before they are finished. Guangdong's provincial housing authority is considering scrapping so-called pre-sales, according to a document seen by media. The system allows developers to receive the entire sale proceeds upfront before construction has finished, which they then use to finance further land purchases and developments. The overhaul would threaten to remove the biggest funding channel for developers, after authorities tightened other financing options from bond sales to borrowing from shadow banks. Such a move would place further strain on the sector, which is facing a record US$23 billion maturity wall in the first quarter of 2019. Shares of Chinese developers slumped in Hong Kong trading Monday. Country Garden Holdings Co., which has relied on pre-sales to help fuel its meteoric growth, fell as much as 8 percent. China Evergrande Group declined as much as 4.9 per cent, and China Vanke Co. dropped as much as 5.4 per cent.