Beijing-based property developer SOHO China Ltd posted 7.388 billion yuan ($1.2 billion) in net profits attributable to shareholders for 2013, dropping 30.2 percent year on year, as its strategic shift from a build-and-sell to a build-and-hold model started to cut into revenue.

For 2013, SOHO China registered 4.687 billion yuan in contracted sales, down 50 percent from the previous year, while contracted sales slumped 59 percent to 75,900 square meters, alongside an average hike of 20 percent in its per-unit sales price.

As the developer seeks to take a long-term view on its projects instead of selling them soon after completion, its rent revenue surged 78 percent year-on-year to 279 million yuan in 2013.

"The results are basically in line with our expectations because SOHO China has been changing its build-and-sell model since 2012. Its profit declined because it sold less in 2013," said Zhang Hongwei, research director of Shanghai-based property consultancy ToSpur.

Analysts said the market is losing momentum in the rapid sales of commercial properties as monetary policy becomes tighter, so it's understandable for SOHO China to make such a strategic change to maintain a more stable income stream from rents rather than property sales.

"Back in the days when almost every developer in China was focusing on residential projects, SOHO China made several successful investments in commercial properties, but the market is losing its sheen from the 2009 to 2011 peak," said Hui Jianqiang, research director of Beijing Zhongfang-yanxie Technology Service Ltd.

However, the shift from selling projects to holding onto them is costly, because it requires abundant cash flow. Some insiders regard the recent sale of SOHO China's two projects in Shanghai as a move by its chairman Pan Shiyi to support the strategic shift.

SOHO China announced last Friday it was selling two commercial buildings in Shanghai for a total of 5.23 billion yuan, lower than the initial asking price, because of excessive supply.

In the first-tier cities of Beijing and Shanghai, average commercial property supply per capita has reached a high level that is equivalent to that of developed nations, according to Hui.

"We believed the company would be in a dilemma during its transition because of tightening capital flow, while the sale of the two less premium projects would effectively ease the company's capital requirements," said a report from China Real Estate Information Corp.

In its earnings statement, Pan also expressed his concern about expensive land prices, saying the creation of "land kings" one after another is a deviation from normal market rules.

Pan added the company will continue to focus on the development, leasing and operations of prime office properties in central Beijing and Shanghai.

Land sales across the nation hit a record high in 2013, with the transaction amount in 300 cities exceeding 3 trillion yuan, rising roughly 50 percent from 2012, according to data from China Index Academy, a research body with the nation's biggest real estate website, SouFun Holdings Ltd.

Beijing, Shanghai, Guangzhou and Shenzhen sold a combined 144.33 billion yuan worth of land in the first two months this year, an 84 percent year-on-year increase, data compiled by property agency Centaline show.

In an effort to tame the land market fever, the municipal government of Shanghai has set a limit on the city's total area of construction land at 3,226 square kilometers by 2020, which means new construction land will not exceed 150 sq km, according to newly released guidelines on improving land-use efficiency.

The 3,226 sq km accounts for 48 percent of the city's total land area, a ratio higher than that of London, Paris or Tokyo, reported Xinhua News Agency, citing the city's guidelines.

The guidelines call for limiting the total area of new construction land, activating existing construction land and boosting land-use quality. Insiders said there is no need to worry about a sudden decline in land supply because there are land-use quotas that have not yet been activated.

wang_ying@chinadaily.com.cn