"They have the largest land bank in those areas," said Zhang Qi, an analyst at Shanghai-based Haitong Securities.

Frank Chen, executive director of China research at international property consultancy CBRE, said the news would boost land values.

"There will definitely be a boost in land values, not only for land in the zone but also sites around it once the … zone is officially marked out and established," he said.

In addition to the normal appreciation in land value, Chen said he expected appreciation through changing land use, mainly from industrial to commercial use.

However, analysts do not expect land values to increase too sharply because of fears that it could drive foreign investors away.

Vincent Cheung Kiu-cho, national director for Greater China at valuer Cushman & Wakefield, said land transaction prices in the existing free-trade zones in Shanghai ranged from 197 yuan (HK$248) to 1,700 yuan per square metre.

Last month an industrial site in the airport free trade zone, which could yield a total gross floor area of 28,046 square metres, was sold for 48 million yuan, or 1,713 yuan per square metre. Earlier this month a site in Waigaoqiao free trade zone, with a total gross floor area of 10,117 sq metres, was sold for 17.2 million yuan, or 1,700 yuan per square metre.

"The government is more concerned about what kind of investments the firms will bring into the free trade zone rather than simply selling land to generate revenue," said Cheung.

Chen said the main purpose of establishing free trade zones in Shanghai and other coastal cities was to find a new growth engine for the local economy rather than look for direct benefits from the real estate.

"To attract desired foreign investment and industries would be the key task of local government and an expensive land price is something possibly standing against it," he said.

"As we have seen in Shenzhen Qianhai, the local authority is likely to provide some guidance to the land market to avoid over-competition while also allowing some reasonable land appreciation,"

Chen tipped state owned enterprises to be the most likely to secure the contracts to develop infrastructure in the zone.

As the approved free trade zone is basically composed of the four established duty-free zones (Waigaoqiao Duty Free Zone, Waigaoqiao Bonded Logistics Zone, Airport Duty Free Zone and Yangshan Port Duty Free Zone), he said master developers of those zones and infrastructure developers involved in those zones such as Waigaoqiao Group, Lingang Group, Shanghai International Port Group and Shanghai Airport Group would have advantages in getting infrastructure development contracts in the free trade zone.

"Moreover, we also expect to see the local authority inviting reputable overseas infrastructure developers to participate," said Chen.

However, the free-trade zone concept might not boost the share price of developers. Shares of all the developers, except Shanghai Zhangjiang Hi-Tech Park Development, have fallen since the July 3 announcement of the free trade zone.

Shanghai Waigaoqiao Free Trade Zone Development has dropped as much as 11.1 per cent since the zone was announced.