Railway giant takes detour into property

China Railway Construction Corp (CRCC) is spending billions on property projects to become a major real estate player.

CRCC and China Railway Group are the two state-owned enterprises that build nearly all of the mainland's railways.

From this year to 2014, CRCC will spend 69.6 billion yuan (HK$85.7 billion) on property projects, more than the 54 billion yuan it will spend on infrastructure, including railways, said the Hong Kong- and Shanghai-listed firm's bond prospectus.

CRCC plans to issue five billion yuan of 270-day bonds, to be used as working capital.

The company's combined 123.6 billion yuan spending plan for 2012 to 2014 is larger than its earlier plan to spend 80.66 billion yuan over the next three years on infrastructure, urban development and property, as stated in its July bond prospectus.

CRCC's planned 69.6 billion yuan investment in property is substantial and would propel the railway company into the ranks of China's second-tier property developers, said an unnamed property analyst. "It's quite big but not the biggest."

In comparison, China Overseas Land and Investment, one of China's biggest property firms, will spend 20 billion yuan on land acquisitions this year alone, said the property analyst. Assuming CRCC breaks even on its property investment, it will have annual average property sales of 23.2 billion yuan over three years, the analyst said.