Real estate companies are experiencing a wave of turning losses into profits, but superficial wealth on paper does not mean they have truly "gone ashore."

AI Question · When will property developers’ real cash-generating capacity recover under paper profits?

Interface News reporter | Wang Yuhan

Recently, the real estate industry has seen a “turnaround wave from losses to profits.”

On March 25, Country Garden? no—Jiazhao Group (Jiazhao Group) released a profit forecast, expecting that in 2025 its attributable net profit to shareholders will be no less than 50 billion yuan, reversing from a loss of 28.5 billion yuan in the same period of 2024. And just one week earlier, Fantasia Holdings, Oceanwide Holdings, and Country Garden also successively released their 2025 performance forecasts, all saying that they achieved the turnaround from losses to profits through debt restructuring.

According to statistics by Interface News, the total book profit disclosed by only these four property developers exceeds 70 billion yuan. This concentrated burst of a “turnaround wave” has drawn market attention. But behind the excitement, what is the true foundation of this “collective revival”—still needs to be examined.

Four profit forecasts, the same “formula”

Judging from the profit forecasts, Jiazhao Group expects to record profit attributable to owners of the company of no less than 50 billion yuan. Its turnaround from losses to profits is mainly due to successful offshore debt restructuring, bringing about roughly $8.6 billion in debt forgiveness. Fantasia Holdings expects attributable net profit of 17 billion–19 billion yuan, while in the same period of 2024 it was a loss of 18.5 billion yuan. The core reason for this change is also the completion of offshore debt restructuring, bringing the company one-time restructuring gains of about 40 billion yuan.

Oceanwide Group expects to record profit attributable to owners of about 3 billion–5 billion yuan, compared with a loss of about 21 billion yuan in the same period of 2024. Country Garden expects to record net profit of about 1 billion–2.2 billion yuan, while its loss in the same period of 2024 was as high as 35.145 billion yuan. Both companies said that their profits mainly come from non-cash gains generated by debt restructuring.

On the surface, the four companies have made a spectacular turnaround from massive losses to profits. But on closer examination, what supports these profits is not an improvement in operations; rather, they are all one-time accounting gains that are not sustainable, caused by debt restructuring.

In addition, a detail worth noting is that the debt restructuring for all four property developers was implemented in the latter half of 2025. Jiazhao Group was in September last year, Oceanwide’s domestic restructuring was in November, and Fantasia Holdings and Country Garden were at the end of December. The time gap between them is only about three to four months. This kind of “synchrony” is not a coincidence.

“On one hand, after the establishment of the real estate financing coordination mechanism, liquidity support at the project level helped stabilize creditors’ expectations and also accelerated the progress of delivering properties on schedule. On the other hand, after a long period of bargaining, creditors realized that rather than letting property developers continue to default and have assets effectively go to zero, it’s better to accept schemes such as debt haircut, extensions, debt-to-equity swaps, and so on to improve the overall repayment rate.” Liu Shui, Corporate Research Director at the China Index Academy, analyzed in an interview with Interface News.

How does debt restructuring “turn” into profit?

When a company is unable to repay its maturing debts and reaches a restructuring agreement with its creditors—whether it involves debt haircut, extension, or debt-to-equity—accounting treatment will trigger an item of “gain from debt restructuring.” How exactly is this gain generated? There are clear accounting standards backing it.

Under the current Accounting Standards for Business Enterprises No. 12—Debt Restructuring, debt restructuring is defined as “a transaction in which, without changing the counterparty, the creditor and the debtor, by agreement or as determined by the court, renegotiate the terms such as the timing, amount, or method of settlement of the debt.”

Put simply, when property developers renegotiate with creditors and reach a repayment plan that is more “favorable” than the original contract, it constitutes debt restructuring in the sense of accounting standards. Then how does this “favorable” treatment show up in the financial statements? The standards set out corresponding accounting treatment rules for different restructuring methods.

Take settlement by asset payment as an example. If a property developer uses cash or non-cash assets to settle part of its debt, Article 4 of the standards states: “If the debt is settled with cash, the debtor shall recognize the difference between the book value of the restructured debt and the actual cash paid as profit or loss for the current period.”

In other words, if a property developer originally owes 10 billion yuan to its creditors and after restructuring it only needs to repay 6 billion yuan, then the 4 billion yuan difference will be reflected as “profit” in its financial report.

In the interview, Liu Shui further explained this accounting logic: “In debt restructuring, if the difference arises because the book value of the restructured debt exceeds the settlement cash, the fair value of the non-cash assets, or the book value of the restructured debt after the restructuring, that difference must be recognized once in profit for the current period, forming ‘gain from debt restructuring.’”

He also emphasized a key point that is easy to overlook: “According to the profit forecasts of the four companies, turning from losses to profits this year mainly comes from gains generated by debt restructuring. After excluding the gain from debt restructuring, they are all still in losses.” This nature of the profit is “profit resulting from accounting standards, which is one-time and unsustainable.”

This profit does not come from cash earned by selling houses or providing services. Instead, it comes from adjustments to accounting figures on the books. It can be described as a kind of “paper wealth,” with clear non-cash characteristics and lack of sustainability.

So, can we judge the industry’s real health through this “paper wealth”?

“Future corporate profitability still depends on changes in revenue and profit generated from normal operations. You should focus on indicators such as core operating profit after excluding restructuring gains, gross margin, operating net cash flow, net debt ratio, and liquidity indicators,” Liu Shui said.

“What is even more worth observing is whether the company’s sales and destocking pace, property delivery status, quality of land reserves, and financing channels have truly recovered. These are better than accounting net profit at reflecting an enterprise’s capacity for sustainable development.”

From “financially getting out of trouble” to truly “being alive”

Behind the “earnings” wrapper, these property developers’ main businesses are still bleeding, and real operating data is not encouraging.

In its performance forecast, Fantasia Holdings stated that in 2025, after excluding non-recurring gains, its core business is expected to incur losses of 7.5 billion–9 billion yuan, expanding from the 5.825 billion yuan loss in the same period of 2024. Oceanwide Group also said that if the impact of the above one-time debt restructuring gains is excluded, it expects to record a loss attributable to owners for the current year.

These figures show that debt restructuring only buys time and does not solve the fundamental problem. When the one-time windfall of restructuring gains runs out, if the sales side cannot rebound, gross margins cannot be restored, and cash flows cannot return to positive, these companies will still fall into a vicious cycle of “losses—restructuring—more losses.”

“Completion of debt restructuring does not equal truly ‘getting out of trouble.’” Liu Shui said bluntly in the interview that if subsequent sales are not smooth and operations fail to improve, there is still a risk that cash flow could break again. Restructuring must be treated as a new starting point, not an endpoint.

He told Interface News that for property developers to truly restore their “cash-generating ability,” they need to clear at least three hurdles:

First, accelerate cash collection from sales and revitalize existing assets. Seize the policy window, use policy tools such as special bonds for reserve purchases and land regulation adjustments, and convert idle assets into cash flow. Without sales, everything is just talk.

Second, focus on core businesses and build a new development model. Divest non-core and low-efficiency assets, and shift toward a development model that places greater emphasis on asset quality, operational stability, and financial security. Asset-light transformation is the direction, but the profit margins of new businesses such as project management services and retirement-related businesses are far lower than those of traditional development, and will require time to cultivate.

Third, wait for the market to warm up and repair financing channels. The overall recovery in industry sales is the foundation for continued cash collection by property developers. Successful debt restructuring helps repair credit and creates conditions for obtaining new financing.

From the current situation, after debt restructuring is implemented, property developers have already started taking action and are working to return to normal operating tracks. Fantasia Holdings proposed a “low leverage, asset-light, high-quality” model and, around this model, established three main directions for transformation. Country Garden proposed a “second entrepreneurship,” stating that 2026 will be the most critical year for the company to move from delivering properties on schedule to normal operations.

The success of debt restructuring has given companies a breathing space. Whether they can truly “get out of trouble” in the future still depends on the effectiveness of sales destocking, asset revitalization, and model transformation. “Paper wealth” cannot support long-term value. Cash from actual sales and continuously stable operating cash flow are the real hard truth that keeps companies alive.