SHENZHEN-listed property developer China Vanke Co says turnover of its department store business is projected to reach 35 per cent in total sales of the company in five years, up from 12 per cent this year. Chairman Wang Shi said 60 million yuan (about HK$55 million) would be invested in retail business this year, with turnover estimated to reach 250 million yuan. Sales of retail business totalled 70 million yuan last year, making up three per cent of sales for the company. It was projected the sales of retail businesses would expand to 25 per cent in three years and 35 per cent in five years. 'It [retail business] is not our core business but its development is promising as we can see a rapid growth in the mainland's consumer market,' Mr Wang said. 'The investment plan for the retail business in the next three years would be made next year.' Gross profit reached 170 million yuan last year. Vanke has one department store in Shenzhen and plans to open more this year. On the company's property development side, Mr Wang said the group would concentrate on middle-grade residential buildings. The strategy was to control the cost and adapt to the purchasing power of the public, he said. 'The construction cost of a flat in a high-rise building is about 400,000 yuan in Shenzhen but the acceptable price is 350,000 yuan only,' he said. 'There is demand for new flats in Shenzhen because of its large and growing population, but can people afford the price even though flat costs have bottomed at 7,500 yuan per square metre. Shenzhen has a population of about three million. 'Meanwhile the government is considering lowering the price of land by 30 per cent.' Mr Wang said the company plans to develop a total of 190,000 sq metres of buildings over the next five years. He said that except for 7,000 sq metres of land in Wuhan, development contracts for the rest of the projects were signed before the beginning of last year, thereby avoiding the introduction of property value-added tax (VAT). Profits generated from property development last year accounted for 61.3 per cent of the total. That amount is expected to rise to 70 per cent this year. As the mainland's austerity measures continued to cool property development, Mr Wang said it would take the market two to three years to absorb the already developed property projects. He admitted the austerity measures had a great impact on Vanke and the effect would continue over the coming years. 'Obviously, the overheating in property development has cooled down and the prices of the construction materials are being pushed down. 'The prices of construction materials are now 30 to 40 per cent lower than the prices in the first half of 1993,' he said. Vanke has investments in 36 companies, including 17 listed companies. Shares purchased cost 103 million yuan, and had market value of 180 million yuan up December 1994. Mr Wang said such investments would not exceed 15 per cent of total investment.