Choosing to forgo the safest option, Peng Yongdong is embarking on a new and "risky" path. A deep transformation that breaks old operational logic and disrupts established interests is bound to encounter growing pains in the short term.

If maintaining the status quo was the goal, Peng Yongdong, Chairman of KE Holdings Inc., need not have undertaken such efforts. Five years after taking over from Zuo Hui, KE remains a leading domestic real estate transaction platform, with a stable transaction volume of over 3 trillion yuan supporting its core business. New ventures are also steadily delivering results: by 2025, non-property transaction revenue accounted for 41% of total income, rental services achieved profitability, and home renovation and furnishing business revenue exceeded 15 billion yuan. Continuing with this established strategy would have allowed KE to progress smoothly.

However, at the end of March this year, the typically low-profile Peng Yongdong announced the formal launch of a major transformation through a lengthy company-wide letter. KE is shifting from a real estate transaction platform to a community living service platform.

Prior to initiating this reform, Peng donated two years of his salary, totaling approximately 700 million yuan.

Public attention has often focused on Peng's substantial compensation. Succeeding Zuo Hui as the helm of KE, Peng also inherited a specific legacy. Zuo held over 20% of KE's shares with about 80% voting rights before his passing. To ensure corporate and management stability, his family granted the voting rights associated with their shareholding to co-founders Peng Yongdong and Shan Yigang.

A year later, in May 2022, as KE approached its Hong Kong listing, Peng and Shan's shareholding—despite their super-voting rights—represented less than 10% of the company's total equity, failing to meet HKEX requirements. Consequently, the board compensated them with a five-year stock grant. Under accounting rules, these shares are amortized annually as "share-based compensation" on the income statement.

The shares granted to Peng and Shan are restricted. To date, neither executive has sold shares for personal gain, except for personal donations. Thus, while the annual share-based compensation appears substantial on paper, no cash has actually reached the executives' pockets.

Peng's actual cash compensation was approximately 11 million yuan in both 2023 and 2024, not exceeding the pay of top executives at leading Hong Kong-listed property firms, and decreased to 9.37 million yuan in 2025. Given KE's scale and performance, this falls within a reasonable range.

Under Peng's leadership, KE's transaction volume has remained above 3 trillion yuan, with revenue showing growth over the past three years. Although net profit has declined somewhat, this is a notable achievement within the real estate sector.

Crucially, KE's new businesses are growing steadily. In 2025, non-property transaction revenue reached 41% of total income, rental service revenue grew 53% and turned profitable, and the home renovation segment's contribution margin rose to 31.4%.

Therefore, continuing the current development trajectory would allow KE to thrive without major changes. Yet, Peng has actively chosen a more challenging path.

In his late-March letter, Peng stated, "I bear overall responsibility for this reform." He is personally stationed at Beijing Lianjia to lead the implementation of the new strategy, signaling a hands-on approach.

This transformation aims to fundamentally alter KE's traditional property transaction model, transitioning agents from mere "information intermediaries" in buying and selling properties to professional service providers. Short-term disruptions are inevitable during this shift.

It is foreseeable that Peng will face significant resistance to change, potentially from agents or frontline managers, pressures he must shoulder. Should the reform fail, leading to a stock price decline, both Peng's professional reputation and personal wealth would suffer. For Peng, complacency was likely never an option.

The label of a real estate transaction platform now constrains KE. Existing home and new home sales have long been KE's foundation, but this base is eroding. In 2025, revenue from existing home sales fell 11.3% year-over-year, while new home sales dropped 9.1%. The downward pressure intensified in the fourth quarter.

The industry remains in a period of deep adjustment. Nationally, new home sales value fell 12.6% in 2025, with residential sales down 13%. In the first quarter of this year, new home sales value declined 16.7% year-over-year.

At the 2025 earnings conference, Peng noted that real estate transaction decisions are becoming more complex, with longer decision cycles for both buyers and sellers, higher trial-and-error costs, and increasing consumer caution.

With the supply-demand dynamic reversed, the traditional model is unsustainable. The market no longer values platforms solely based on store count, regional coverage, or transaction volume. The industry needs services that align with evolving consumer demands.

As Peng stated in his letter, "Our future focus will not just be on the value per transaction, but on the depth of connection, value created, and trust built around the customer lifecycle."

For KE, reform is imperative for navigating the real estate cycle and discovering new growth avenues. This task falls to Peng, and he will be accountable for the outcome.

Peng was Zuo Hui's chosen successor, inheriting his vision. Reports indicate that as early as 2019, Zuo had fully delegated KE's daily operations and management to Peng. After five years at the helm, Peng has never reduced his KE shareholding for personal gain.

Structurally, Peng is deeply tied to KE. As a co-founder, he and Shan Yigang hold 49.3% of the voting rights through a WVR structure. Consequently, Peng must lead the reform. Success means shared benefits with employees; failure entails greater personal consequences compared to ordinary staff.

Criticism regarding the disparity between executive compensation and agent earnings is another challenge KE must address.

With the real estate transaction business struggling and most agents seeing income declines, the underlying issue is that KE's profit distribution model no longer fits the current environment.

Previously, Zuo Hui introduced the ACN system to curb恶性 competition and help agents gain dignity through collaboration. During the property boom, the large market allowed agents to earn substantial commissions easily under ACN. However, with transaction volumes significantly down, the pie has shrunk, making it difficult for new agents to survive, let alone earn satisfactory incomes.

Peng is clearly aware of this. In an October 2025 discussion with a team, he reflected, "2025 was a wake-up call. If we can't fundamentally improve the industry and the livelihood of service providers, our existence holds little value. If we don't make service providers better, what is our purpose?"

Peng is striving to improve conditions for service providers, starting with personal contributions. In December last year, he donated shares worth approximately 440 million yuan to enhance agent welfare and support recent graduates with rental assistance. In February this year, he and Shan Yigang jointly donated shares worth about 400 million yuan for employee emergency aid, family support, and children's education.

The core of KE's transformation is to restore agents' confidence and dignity. Moving forward, KE aims to turn agents into expert service providers—acting not just in transactions, but as cloud-based property managers, school district specialists, loan consultants, and renovation advisors, becoming trusted community advisers.

This shift necessitates changes to the agent evaluation system. Peng's letter emphasized transitioning from a "transaction-centric" approach to one focused on "residential decision support" and "long-term service relationships," cutting non-value-added controls, streamlining metrics, and enhancing job security for frontline staff.

These are likely not empty promises, as reforms have already begun at Beijing Lianjia. Initial changes target cumbersome, low-value assessment tasks. Recently, requirements like full-process QR code scans for property viewings, mandatory customer WeChat Work registrations, and owner group verifications were abolished—steps that previously turned a simple viewing into a multi-hour, five-step process. Feedback channels for agents were established, quickly gathering hundreds of suggestions.

Beijing Lianjia's General Manager and Chief Customer Officer, Hao Yufeng, succinctly outlined the direction: let agents focus on their core work, use product features as needed without mandates, reduce assessment metrics, and establish agent feedback mechanisms.

Performance allocation is also tilting toward the frontline. Allocations for non-core support roles in new home sales have been cut, redirecting more share to those directly serving customers.

Peng leads the Beijing Lianjia Strategy Committee, engaging directly at the community level to implement new policies. Beijing Lianjia has integrated agency, leasing, and renovation services to offer comprehensive, lifecycle support including transactions, rentals, renovations, property management, and asset management.

A landmark change is the overhaul of the agent professional capability system. The 15-year-old "Boxue" exam will be upgraded in June to a "Service Provider Certification System," shifting from a uniform knowledge test to a tiered L1-L5 certification, free of charge, with KE bearing over 15 million yuan in annual costs. Higher certification levels grant greater platform resources and support.

The message is clear: KE aims to equip agents as trusted professionals worth paying for, not just manage them as assessment targets.

Tool-level changes are also underway. Beijing Lianjia recently piloted a "Sincere Sale" feature where sellers set a base price and buyers bid systematically, reducing weeks of negotiation to hours. In a two-week trial, it facilitated four deals, including previously stalled transactions completed within 10 days. The feature is currently limited to suitable properties assessed by agents.

If successful, regional expansion is inevitable, driving further changes in distribution mechanisms. Peng stated, "Upgrading the collaborative ecosystem will ultimately lead to a upgraded distribution mechanism, ensuring fair, long-term rewards for value creators."

This transformation is crucial for KE's future and for restoring dignity to agents. Rather than focusing on Peng's compensation, attention should be on how he navigates pressures along this "difficult yet correct" path.