Real estate funds eye China market

Despite Beijing's warning there will be no let-up in its measures to rein in the property market, global investors are showing renewed interest in the sector after staying on the sidelines for more than a year.

International investment funds are preparing to raise fresh capital to invest in a market where asset prices have fallen to realistic levels after two years of cooling measures. More distressed assets are coming to the market as a result of credit tightening.

LaSalle Investment Management, the global property manager, is understood to be raising regional funds which could reach as much as US$750 million, according to people familiar with the matter. Investment fund Gaw Capital Partners said it was mostly likely to go to market with its next fund in the US$700 million-plus range in the next few months.

Their moves come despite Premier Wen Jiabao last week reiterating the government's intention to maintain cooling measures.

'We have been extremely active in buying in the past three months versus doing virtually no deals in the previous 18 months,' said Goodwin Gaw, co-founder of Gaw Capital, which oversees private equity funds of more than US$1 billion.

People in the industry say foreign funds foresee more buying opportunities towards the end of the year as more cash-strapped developers are forced to unload assets to stay afloat. 'We will avoid the residential sector, which has not yet bottomed out; the restriction on home purchases are likely to remain in place this year,' one fund manager said. 'Previously, foreign funds flocked to invest in residential projects to capitalise on surging home prices.'