Once world’s largest real estate company, now declared bankrupt:Founder of China’s Evergrande sentenced to life imprisonment

There was a time when Hui Ka Yan, a poor village boy from China, became the country’s richest man by becoming a merchant of ‘urban dreams’ for millions of people. He built a massive empire called ‘Evergrande’ that constructed skyscrapers and bought football clubs. The model was simple – buy land, sell entire flats on paper before the foundation was even laid, and use that advance money from customers to start the next project. But the foundation of this house of cards was built on reckless debt. When the government shut off the debt tap, the empire came crashing down. Leaving behind 1,300 incomplete projects spread across 280 cities and a mountain of debt worth $300 billion, approximately ₹28 lakh crore, Evergrande was finally buried in the pages of history. The court sentenced founder Hui Ka Yan to life imprisonment for financial fraud and sent him to jail, and the very next day, the Guangdong court sealed the order to completely shut down the company.
Understand 10 important questions and answers related to China’s biggest estate crash: Question 1. Why did the court accept the petition for bankruptcy proceedings against Evergrande? Answer: The Guangzhou court delivered this verdict on a petition by Guangzhou Rural Commercial Bank. The court acknowledged that the company is completely unable to repay its debts and its total assets are much less compared to its liabilities. With this, the legal process to completely shut down the company has begun. Question 2. What actions have been taken against Evergrande’s founder Hui Ka Yan and the company? Answer: 66-year-old Hui Ka Yan has been convicted of fraud and financial irregularities and sentenced to life imprisonment. All his political rights have been revoked and an order has been issued to confiscate his entire personal wealth. Additionally, the Shenzhen Court has imposed heavy fines of 8.82 billion yuan on the parent company China Evergrande and 7 billion yuan on Hengda Real Estate. Question 3. What does delisting from the Hong Kong Stock Exchange (HKEX) mean? Answer: After trading remained suspended for 18 consecutive months, Evergrande’s shares were delisted from the Hong Kong Stock Exchange on August 25, 2025. Delisting means that Evergrande’s existence as a publicly traded company has now ended. Evergrande, once the world’s most valuable real estate company, now has shares worth almost zero. Question 4. How big was Evergrande company and how did it grow? Answer: Evergrande grew big by riding the wave of China’s urbanization. China’s urban population has increased from 20% in 1980 to 66% today. Evergrande adopted the model of “take loans, buy land, sell flats through advance bookings and start the next project with that same money.” In 2017-2018, it became the world’s most valuable real estate company. Its value was around $400 billion. Today this would be approximately ₹4.90 lakh crore. Question 5. How did the actual downfall of this giant company begin? Answer: The main reason for the downfall was the Chinese government’s ‘Three Red Lines’ policy, which was introduced in 2020 to curb developers taking on excessive debt. This stopped the cheap credit that Evergrande was receiving. The company was operating solely on advance payments from new flat sales. As soon as credit stopped and home sales declined, the company’s entire cash flow came to a halt. Question 6. How much debt does Evergrande have and what is the recovery status? Answer: According to Bloomberg, Evergrande had a debt of over $300 billion in 2025. Alvarez Marsal, the firm handling the liquidation responsibility, had sold assets worth approximately $255 million in 18 months, while creditors had filed claims worth $45 billion (₹3.75 lakh crore). Question 7. Have common people’s homes been left unconstructed due to Evergrande’s collapse? Answer: Yes. When the company collapsed, it had more than 1,300 projects incomplete in 280 cities across China. However, the Chinese government has prioritized the interests of its local citizens over foreign creditors and has directed builders to complete only those incomplete projects. Question 8. Can Evergrande be compared to the 2008 American ‘Lehman Brothers’ crisis? Answer: Experts believe that this is not ‘China’s Lehman Moment’. The collapse of Lehman Brothers in 2008 sent shockwaves through the entire global banking system because its debt was linked to international banks. In contrast, the Evergrande crisis has been handled very slowly and in a controlled manner by the Chinese government, which has averted a global financial crisis and kept China’s banking system stable. Question 9. What impact has this crisis had on China’s entire economy? Answer: Real estate was approximately one-fourth (25-30%) of China’s GDP. Evergrande’s collapse slowed down construction, which reduced the demand for steel and cement. Local governments’ earnings from land sales stopped. The confidence of ordinary Chinese people was also shattered. Question 10. What is the lesson from this entire story for the world and India? Answer: This case proves that a growth model based on excessive debt eventually collapses. China’s debt-driven estate growth era has now ended. For Indian real estate and regulators like RERA, the lesson is how important strict rules regarding escrow accounts and timely project delivery are so that the money of ordinary buyers remains safe. Knowledge Box – What were the ‘Three Red Lines’?: