ING, Legend tie up for homes projects

Changsha focus marks march into booming second-tier cities

ING Real Estate has teamed up with Raycom, the property investment arm of Legend Holdings, the parent of computer maker Lenovo Group, to develop residential projects in Changsha, marking its first step into China's second-tier cities.

The property investment arm of Dutch financial services firm ING Group invested US$22.4 million in a joint venture that would develop two existing residential projects and potential new projects in Changsha in south-central China.

As part of the agreement, ING will buy a minority stake in Raycom. An ING spokeswoman declined to disclose either the size of the holding or its value.

'We plan to set up a US$300 million to $400 million fund named ING Real Estate China Opportunity Fund,' said ING Asia chief executive Robert Lie.

The investment will be limited to residential projects, mostly in big cities 'with a few projects in second-tier cities', Mr Lie said.

He said Changsha was targeted because its economy was growing faster than Shanghai's and its property market relatively stable.

The joint venture will develop two existing projects with a gross floor area of 450,000 square metres. A residential project in Dong Tang is already being built, with units due to go on the market by the end of next year. Work will begin on the other development next year.

DTZ city integrated residential services director Alan Chiang said: 'ING is the first foreign investor to enter the Changsha property market. I believe the strong economy and potential growth in flat prices in Changsha are attractive to institutional investors and developers.'

Gross domestic product growth in Changsha was as strong as in Hefei and Wuhan, but the average flat price was lower than in other second-tier cities, he said.

Due to poor building quality and the small scale of developments there, flat prices range from 3,300 yuan to 3,500 yuan per square metre.

Mr Chiang expects that property prices will climb once foreign investors enter the market

Property consultants said Henderson China and New World China Land were also looking for development sites in Changsha.