Companies

Developers make changes to beat tightening policy

By Hu Yuanyua (China Daily)
Updated: 2011-03-26 09:36

BEIJING - China's property developers are diversifying their business lines, exploring different market segments and expanding to lower-tier cities to deal with the nation's rigorous real estate tightening policies, industry insiders said on Friday.

The government's constraints on the residential sector, and its increasing efforts to boost the supply of affordable housing, have seen a growing number of property firms redoubling their efforts to explore the commercial sector and spread their risks.

According to the China Index Academy, a property research institute, the planned floor space of the country's top 100 developers climbed by 5.92 percentage points for retail and by 0.91 percentage points for commercial properties in 2010 year-on-year, becoming a new engine for business.

"Our investment into the commercial real estate sector will account for 30 percent in the coming three years," said Liu Ping, vice-president of Poly Real Estate Group Ltd.

Meanwhile, resort property is also a new attraction for leading property developers.

The Shenzhen-based Guang Real Estate Group Co Ltd is planning a 2-million-square-meter (sq m) resort project in Weihai, Shandong province, hoping to lure wealthy customers from Beijing, Shanghai and the South Korean capital, Seoul.

"Given the current policy tightening, we have to further segment the market, identify customers' new demands and present competitive products," said Yuan Yi, chairman of the Pan-Bohai Sea Cooperation Zone, affiliated to the Guang Real Estate Group.

According to the China Real Estate Center, in the wake of the global financial crisis, around 12 percent of traditional property companies moved into the development of industrial parks because of the lower costs involved.

The center's statistics show that the unit price for industrial land stood at 723 yuan ($110) for each sq m last year, compared with 8,442 yuan for each sq m of residential land.

In terms of geographical expansion, more property developers are turning their focus to the lower-tier cities.

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According to a joint study by the China Real Estate Research Association, China Real Estate Association and China Real Estate Appraisal, the sales value, sold floor space and price growth in second and third-tier cities have beaten the first-tier cities, making them the major focus for real estate companies.

"We'll watch the progress of China's urbanization process and further strengthen our exploration into lower-tier cities and increase our participation in government-subsidized housing construction," said Mao Daqing, vice-president of the country's largest property developer, Vanke Group.

Despite short-term market volatility, the long-term prospects for China's property sector remains bullish.

McKinsey & Co's latest report shows that China will be the largest investor in both infrastructure and residential real estate by 2030.