For the last three weeks, developers across the country have seen home transactions slump to virtually zero after they closed down their sales offices as part of the government’s campaign to prevent the spread of the virus which has killed 2,236 people and infected 75,465 on the mainland as of Feb. 21. The China Real Estate Association issued a notice (link in Chinese ) on Jan. 26 urging the shutdown and many provinces, including Hunan, Jiangxi, Guangdong, Hainan and Heilongjiang, have instructed developers to suspend or reduce sales activities involving human-to-human contact, effectively forcing them to shutter their brick-and-mortar operations.“I’ve been in real-estate marketing for 20 years and I’ve never seen anything like it. Sales offices were closed literally overnight,”

 Ke Min, founder of Hainan Youjia Zhixuan, a property sales agency based in the southern island province of Hainan, told Caixin.China Real Estate Information Corp. (CRIC), a property consultancy and data provider, said in a Feb. 14 report that local governments in more than 100 cities instructed property firms to shut their sales offices. Over the weeklong Lunar New Year public holiday that originally ran from Jan. 24 to Jan. 30, more than 90 cities had no new properties for sale, 24 had no transactions, and overall, sales slumped by 93% from the previous week. In the first week of February, there wasn’t a single transaction in 27 of the cities and total sales dropped 95% compared with the first week following the Lunar New Year holiday in 2019, it said.New Year gloomThe Lunar New Year is usually an important selling opportunity for property developers, especially in third- and fourth-tier cities, as millions of people making their annual trip home for the holiday make purchases. But the coronavirus epidemic has upended the tradition this year.One marketing executive with a major property firm told Caixin that it usually keeps one-third of its sales team working over the holiday period, but this year it cut back significantly and then sent them all home after the China Real Estate Association issued its notice.Some developers have tried to bolster sales by turning to online marketing, promoting new developments through WeChat accounts, mini programs and websites, and offering virtual tours. But so far, they’ve had little success,

 as few buyers are prepared to put down a deposit without physically visiting the site.Even if the coronavirus outbreak ends by the beginning of March, real-estate sales are likely to plummet by 79% year-on-year in February and 43% in March, property services provider Savills PLC predicted on Monday. But if the epidemic lasts well into March, the slump that month could deepen to 69%, it said.Without sales, many developers, especially small private companies with weak balance sheets and no access to bank loans could go out of business. Funds raised from deposits, pre-sales and sales of apartments have become one of the biggest sources of cash for real-estate companies over the last few years as the government has squeezed other traditionally important channels such as bank credit and loans from trust companies.In 2019, real-estate developers took in 6.14 trillion yuan ($873 billion) from deposits and advances, 34% of the total amount of funds they raised, and the biggest single source of funding, while bank loans accounted for just 2.52 trillion yuan, government data show. Without income from deposits and advances, 

many developers will struggle to fund construction of ongoing and new projects and to repay debt. A report by Ping An Securities estimated that based on an assumption of a 50% drop in operating cash flow, most developers only have enough cash to last another three months.More bankruptciesIf sales offices do not reopen soon, many small and midsize property firms could face a cash crunch within three months, Wu Jianbin, executive vice president of Fujian-based developer Yango Group Co., a Shenzhen-listed property developer, told Caixin. “This is just the beginning and without a significant alleviation in the epidemic, it’s going to continue.”Wu, a real-estate veteran who has worked for several big developers, said that a developer with annual sales of around 100 billion yuan would see its income cut by 20 billion yuan to 30 billion yuan if it had no sales for three months, but would still have to service its debts and make payments for the land-use rights it has bought from local governments, which might total around 10 billion yuan.So far, the epidemic doesn’t seem to have had a major impact on bankruptcies among property developers. Data from CRIC show that in 2020 up to Feb. 10, a total of 69 property firms have failed, including 20 in early February, similar to figures from the same period in 2019. But the research firm warned in its Feb. 16 report that as the epidemic continues, more developers are likely to apply for bankruptcy. According to government data (link in Chinese), the country had almost 98,000 property development companies in 2018.