Working #development, investment and #acquisition strategies in building a diversified #China property portfolio

At the recent Real Estate Investment World China 2012 conference – CEO Veterans Panel Discussion on 20 March at Beijing, Albert Lau of Savills, Fan Wei of Fosun Group, Li Zhenyu of Sino-Ocean Land Holdings Limited | Gemini Investments (Holdings) Limited and Xu Feng of Greentown Property Construction Management Co. Ltd came together to discuss on:

• Relevance of current business models and product offerings – What can be improved or done differently?
• Reviewed demand-supply dynamics and project pipelines across various cities and sectors
• What are the challenges and opportunities that property majors foresee in deal sourcing and capital management?

In summary, the panelists have come to agreed that as  the  residential  market  cools down and bank credit  tightens,  real  estate  companies  would  modify  their business strategies and launch new products in adapting to market changes.

Since real estate investment funds is one of the popular products launched in today’s real estate market, by collaborating with finance companies, developers could offer real estate related financial products to its customers.

Similarly, construction outsourcing is another service designed to meet market need, hence some established developers offer packaged service plans, including development advisory and construction building services to small and medium-sized real estate companies, which optimises the existing resources of experienced developers.

Though some developers shift their focus from first-tier cities to second and third tier cities, due to the lack of demand, over supply and local management, teams increased project risks.   And even with urbanisation, housing demand is still low in second and third-tier cities as many suburban residents tend to purchase apartments in urban areas. Furthermore, the ratio between land leased by the government and property sold is low.

From the developer’s perspective, social housing has limited impact on the residential housing market.  Only the mid-range and low-end residential housing will be affected by the supply of social housing.   However, impact is limited as the government does not grant property rights to social housing.

In their project pipelines, developing high quality social housing ensures the living standards of low income families and also helps the company to brand their name.

Apart  from  building  residential  properties,  developers  also  design  value-added  services,  such  as  facility management and environmental maintenance to generate revenue from different sources.

In the nutshell, as the real estate market cools down, land prices will depreciate as well.  This presents a great opportunity for developers to purchase land at attractive rates, where they are able to finance projects with investment funds.

Dive further into China focus sessions with Hang Lung Properties Limited, Arch Capital Management, CBRE Global Investors, ARA Asset Management Limited, CITIC Capital, Tishman Speyer and Savills at Real Estate Investment World Asia 2012, taking place from 26 – 28 June at Marina Bay Sands, Singapore. Visit www.reiwasia.com or download conference brochure for more information