Comparison of financing models of real estate enterprises: evidence from Vanke and Poly

Abstract

Contemporarily, the problem of financing plays a critical role in real estate enterprises. As for China, the financing model of real estate enterprises is single, and the capital structure is unreasonable. Therefore, it is particularly crucial for real estate companies to search an appropriate financing model. In this paper, we investigate the financing models based on the case analysis of Poly Development and Vanke, which are both leading enterprises in China's real estate enterprises, and compare the differences in the cost of funds and cash flow. According to the analysis, Vanke's financing model was better than Poly's development. If real estate enterprises want to break through the current predicament, they should change the situation of relying on bank loans, e.g., raise fundings from additional corporate bonds and medium-term notes to increase the proportion of direct financing and reduce the proportion of indirect financing. Enterprises should also explore diversified financing methods and expand financing channels. These results provide clues to guide real estate companies to obtain a more reasonable and perfect further exploration.