Property development is a capital-intensive business. In the midst of a cooling market, industry players are searching for new ways to maintain their competitiveness and profitability.
At the Boao Forum in April, Pan Jun, chairman and chief executive of Fantasia Holdings, explained why it is necessary for real estate developers to shed their assets.
“During the golden years of the property market, real estate developers typically preferred to bid on land and build, develop and sell houses all on their own. Although this method needed the most capital, the return for the developers could be maximized in a strong market, like the one a couple of years ago.”
However, if the housing market is heading the other way, such a business model will add to the financial burden of developers.
That’s why it is a must for property companies to transform themselves into “light asset” firms by tapping partners for their projects, Pan said. In addition, they will receive fees for managing them.
Landsea Green Property and Vanke are two developers with this strategy.
China Greentown has chosen a different path. Rather than building and selling projects, the group builds houses for other developers to capitalize on its edge in construction quality while leaving sales and marketing to others.
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