What Cinda’s financing model means for the property sector
Is this the new normal? State-owned enterprises using their financial muscle to amass land as an asset rather than for its development potential
When little-known mainland developer Cinda Real Estate snapped up a plot of land in suburban Shanghai in June for four times the starting bid price, it highlighted a new normal in the real-estate business — state-owned enterprises using their financial muscle to amass land as an asset, rather for its development potential.
The growing number of examples is now causing serious concern among traditional developers, who fear they will continue to lose out to deeper-pocketed state rivals who have access to cheap funding, and who do not necessarily need to show a quick return on their investment.
And their wider fear, is the ongoing practise will push up land prices to levels that private firms simply cannot afford.
There is even speculation, too, that some state firms are already teaming up with local governments, to push up property prices.
“Companies like Cinda are not gobbling up land under the logic of developers, but under the logic of asset allocation,” said Zhang Hongwei, research director of Tospur Real Estate Consulting.
“The driving force is they are bullish about asset prices in first-tier cities,” he said.
The previously obscure Cinda has since been absent from any more so-called “land king” deals, after state firms were warned by regulators in mid-June to refrain from such aggressive purchases, fearing they could stoke further public aggravation.