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When real estate companies finally get through the peak of debt repayment, a profound transformation from development to operation is redefining who can win in the future.
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(Daily Capital Photography)
Real estate tycoons burdened by debt may finally be able to breathe a sigh of relief.
In the first quarter of 2026, the debt repayment cycle for real estate companies is reaching a &#34;turning point,&#34; with the pressure of maturing debt continuing to ease. Data monitored by CRIC shows that the total amount of maturing debt for real estate companies in 2026 is approximately 352.1 billion yuan, a reduction of over 100 billion yuan compared to 454 billion yuan in 2025. The statements made by listed real estate companies at their latest earnings meetings also convey a positive expectation of alleviating industry debt pressure, indicating that the overall industry default risk is entering the final stage of release and is developing towards a stable and healthy direction.
In simple terms, the most difficult period for Chinese real estate companies may soon be over.
However, what is more noteworthy is not merely surviving, but what kind of survival it will be. Recently, leading real estate companies such as China Resources Land and Longfor Group submitted their performance reports for 2025, revealing a fundamental change occurring in the Chinese real estate industry—real estate development is no longer the only story, nor is it even the core source of profit.
This deep adjustment, which began in the second half of 2021 and has lasted five years, is forcing Chinese real estate companies to collectively pivot—from the traditional model of &#34;high leverage, high debt, high turnover&#34; to a new development model driven by &#34;low debt, low financing costs, and positive cash flow.&#34; Those companies that have completed this pivot first have already sprouted new branches.
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Saying goodbye to &#34;three highs,&#34; real estate companies pivot
By 2025, the national sales area of commercial housing has cumulatively fallen by over 50% compared to the peak in 2021, and the market is still in the process of bottoming out. However, during this round of adjustment, a structural change is occurring: according to data from the National Bureau of Statistics, the proportion of second-hand housing transactions in the total housing transaction volume has significantly increased, with this proportion approaching 45% in 2025, up 17 percentage points from 2021.
This means that the contraction of the new housing market is not due to the disappearance of demand, but rather a profound change in housing consumption patterns.
The China Index Academy clearly states in its &#34;2026 Research Report on the Top 100 Real Estate Companies in China&#34; that the industry's development is shifting from scale expansion and high leverage to a stage based on survival and focused on high-quality development. In the long term, the total urban housing demand nationwide during the &#34;14th Five-Year Plan&#34; period is approximately 4.98 billion square meters, with improvement demand becoming the core driving force of the incremental market, while urban renewal and operational services bring significant growth opportunities to the stock market
In the context of the real estate industry fully entering the era of stock assets, professional operations and quality services have become the core engines for real estate companies to break through the ceiling of development business and tap into the value of stock assets.
China Resources Land is one of the pioneers in transformation. The 2025 performance shows that the company's recurring business (operating real estate, light asset management, and ecosystem factor-based business) core net profit increased by 13.1% year-on-year to 11.65 billion yuan, accounting for 51.8% of the core net profit, marking the first time that non-development business contributed more than half of the core profit. Li Xin, Chairman of the Board of China Resources Land, summarized the company's business model as &#34;three growth curves&#34;: development and sales business as the first curve, operating real estate rental business as the second curve, and light asset management fee-based business as the third curve.
In other words, China Resources Land has completely bid farewell to the traditional development model of &#34;high leverage, high debt, and high turnover.&#34; Another representative of private real estate companies, Longfor Group, started this transformation earlier and has shown a more mature &#34;comprehensive appearance.&#34;
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Longfor Sample, from Development-led to Diversified Collaboration
On March 27, Longfor Group disclosed its full-year performance for 2025. The financial report shows that during the period, the group achieved operating revenue of 97.31 billion yuan. In the fifth year of deep adjustment in the real estate industry, Longfor's performance structure shows a clear &#34;dual nature&#34;: the scale of traditional real estate development business has contracted, and profits are under pressure, while the operational and service business cultivated over the years has contributed stable cash flow and profits, becoming a key support to navigate through the cycle.
Note! In 2025, Longfor's operational and service business achieved a total revenue of 26.77 billion yuan, setting a historical high, accounting for 27.5% of the group's total revenue; the two businesses combined achieved a core profit of 7.92 billion yuan, with an overall gross profit margin exceeding 50% and a net profit margin of about 30%. Against the backdrop of the group's total attributable profit of 1.02 billion yuan, the operational and service business contributed the majority of the core profit.
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This shift in business structure means that Longfor is substantially breaking away from its single reliance on the traditional high turnover model.
Specifically, the operational business, composed of commercial investment and asset management, achieved revenue of 14.19 billion yuan in 2025. Among them, commercial investment channel rental income increased by 4% year-on-year to 11.21 billion yuan. By the end of the year, Longfor had a total of 99 operating shopping malls, with a high occupancy rate of 97%, and both turnover and foot traffic achieved double-digit growth
The asset management sector focuses on six business areas: long-term rental apartments, industrial offices, serviced apartments, vibrant neighborhoods, women's and children's hospitals, and health and elderly care, aiming to achieve revenue of 2.98 billion yuan by 2025. Through optimizing asset allocation and operational efficiency, the goal is to enhance both asset quality and profitability. The long-term rental apartment brand, Guan Yu, has achieved a rental rate of 95.7% within six months of opening, while the new vibrant neighborhood &#34;Huan Si&#34; has debuted in four cities: Shanghai, Hangzhou, Hefei, and Chengdu.
The service business, primarily focused on property services and smart construction, generated revenue of 12.58 billion yuan. The total revenue from property services for the year was 11.23 billion yuan, managing over 2,100 projects with a managed area of approximately 360 million square meters. Notably, new commercial services have secured landmark projects such as Xi'an Xianyang International Airport and Chengdu Kuanzhai Alley.
On the development side, Longfor's strategy has shifted away from scale demands, fully focusing on absolute control over cash flow safety and product quality. In 2025, the group achieved a contracted sales amount of 63.16 billion yuan, with a total sales area of 5.186 million square meters. The consolidated sales collection rate exceeded 100%, achieving high-quality capital recovery.
From a regional distribution perspective, sales in first- and second-tier cities accounted for 89%. In terms of new investments, Longfor continues to maintain a prudent stance, acquiring seven plots of land in core cities such as Shanghai, Shenzhen, Suzhou, Chongqing, and Chengdu in 2025, with a total new land reserve building area of 377,000 square meters. By the end of 2025, Longfor's total land reserve building area will be 22.35 million square meters, with an equity area of 17.32 million square meters, preserving a solid foundation for future development.
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Debt restructuring: from credit financing to asset credit
The deeper support for Longfor's transformation comes from a fundamental reshaping of its debt structure.
Over the past three and a half years, Longfor has actively moved away from its previous expansion model reliant on credit financing, prioritizing the reduction of debt scale and the reconstruction of its debt foundation. By the end of 2025, Longfor's interest-bearing debt had decreased to 152.81 billion yuan, down 23.51 billion yuan from the end of the previous year, a reduction of 13%, and nearly 60 billion yuan lower than mid-2022, with supply chain financing achieving zero.
More critically, there has been a qualitative change in the debt structure. The proportion of bank financing has risen to nearly 90%, with long-term operational property loans and long-term rental loans exceeding 100 billion yuan, characterized by low costs and long terms. By the end of 2025, the group's average financing cost had dropped to 3.51%, and the average contract loan term had extended to 12.12 years, both at historically optimal levels. Short-term debt maturing within one year was only 15.8 billion yuan, accounting for about 10%.
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Not only that. In recent years, Longfor has continuously solidified its financial foundation of debt safety and cash flow safety to gain key support and strategic initiative to navigate through industry cycles. Since 2023, Longfor has insisted on driving business growth with positive operating cash flow, building a sustainable foundation with a safe and stable debt structure. In 2025, Longfor Group achieved a net inflow of operating cash flow, including capital expenditures, of 5.8 billion yuan, marking the third consecutive year that Longfor Group has achieved positive operating cash flow including capital expenditures.
At the earnings release conference, Longfor Group's Executive Director and CFO Zhao Yi detailed the thickness of the debt safety cushion: &#34;The company successfully navigated the peak of debt last year. From 2026 onwards, the group's annual maturing debt will trend towards stability, with only about 6.1 billion yuan remaining due in 2026 and about 6.2 billion yuan in 2027.&#34;
Zhao Yi also summarized Longfor's three principles of financing management: strictly adhering to credit, ensuring bank financing is not overdue or extended, and avoiding defaults on public market debt; continuously improving the net property income (NPI) of operating assets, exploring financing space for operational properties, and controlling short-term and foreign currency debt; strengthening cash management, establishing an account-level control system, and proactively managing maturing debt.
JP Morgan stated in its latest research report that Longfor is likely the &#34;last bastion&#34; among private real estate companies. Morgan Stanley believes that Longfor is on the right track, aiming to achieve 10 billion yuan in operating and service business profits by 2028.
Some industry insiders have indicated that, in a certain sense, Longfor's transformation practice not only helps it maintain stable development during the industry's adjustment period but also reveals the future development direction of Chinese real estate companies. Against the backdrop of reaching a debt repayment inflection point, this &#34;basic plate + growth plate + innovation plate&#34; comprehensive development model holds significant industry value and reference significance.
Although the road to transformation is fraught with difficulties, once the new foundation is established, a more resilient and sustainable new type of real estate company will stand at the starting point of a new round of high-quality development. For the entire Chinese real estate industry, Longfor's transformation path may be the repeatedly asked answer: what should real estate companies become in an era of peak incremental growth.
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[This article is for communication purposes only and does not constitute investment advice. Please be aware of investment risks. Writing is not easy; if your phone still has power, please like and share. Wishing all readers a joyful heart in 2026, welcoming the new year with good fortune, accumulating blessings year after year, and smoothly navigating through the seasons!]

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Chinese real estate companies are facing profound changes after experiencing a peak in debt repayment, shifting towards a new development model characterized by low debt and low financing costs. By 2026, the scale of maturing debt for real estate companies will decrease to 352.1 billion yuan, alleviating industry default risks and moving towards stable and healthy development overall. Real estate development is no longer the sole source of profit, with the proportion of second-hand housing transactions rising to 45%. The industry is transitioning from high-leverage expansion to a focus on survival and high-quality development

Goodbye to the "Three Highs," the life-and-death transformation of real estate companies