Funds look to investing in China property

HONG KONG: Property investors are pencilling “second half, 2009” in their diaries as the likely time to start pouring money into China again as they search for bargains in its ailing real estate market.

But they are wary of slowing economic growth, overbuilding in some areas, difficult partnerships with developers and red tape.

Private equity fund manager Gaw Capital Partners is looking to raise up to US$1.5bil for Chinese property, while ING Real Estate is marketing a US$750mil fund it wants to launch in the first quarter of next year.

“I think it’s a good time to start looking,” said Goodwin Gaw, cofounder of Gaw Capital, which manages US$4.7bil of assets in 14 Chinese projects. “2009 and early 2010 could be a sweet spot.”

Many among the 540 investor groups at the MIPIM Asia property conference in Hong Kong last week pinpointed China as the market that would recover quickest from the global economic crisis because of growing domestic demand for housing and office space. And they are keen to raise funds to prepare.

Behind the enthusiasm is a hope that capital starved property firms will offer plum investment deals to foreign investors looking for internal rates of return of 25%-30%.

China has announced four trillion yuan (US$586bil) in fiscal stimulus measures, with 800 billion yuan going to low income housing and one trillion yuan on infrastructure spending.

While economists admit they do not know how much is new spending, they believe more steps are in the offing - probably tax and interest rate cuts and perhaps more spending in earthquake-hit Chengdu.

By Reuters