THE Chinese Government's austerity measures appear to have had little effect on foreign companies' appetite for investment in Shanghai's real estate market, with city officials giving initial approval to 114 new projects in the first half of this year. Gu Huachang, vice-director of the Shanghai Municipal Land Administration Bureau, said foreign companies had expressed strong interest in the city's real estate market since 1992. Mr Gu said investor sentiment had not been dampened by the central government's austerity programme, which was formulated by Vice-Premier Zhu Rongji and implemented in July last year. ''As of July 31, we had granted the right to lease 114 plots of land, at a cost of US$900 million, to companies from Hong Kong and Taiwan and property development firms from other countries,'' said Mr Gu. The plots would be developed into residential, commercial and industrial property projects during the next three to four years, and the total developable area was 4.72 million square metres, he said. Foreign investors have tended to focus on the residential sector in Shanghai, and about 35 per cent of the leased land will be for residential use. However, high returns in the office and industrial sectors are also attracting interest. Mr Gu said about 19 per cent of the projects would be for offices, while industrial property projects would account for 28 per cent. Hong Kong companies have shown the greatest interest in Shanghai's property market, according to Mr Gu. He said Hong Kong companies had leased 36 of the 114 plots. Investors from the territory included property development giants Henderson Land, Sun Hung Kai Properties and Macau tycoon Stanley Ho. He said he did not expect to see an oversupply situation develop in Shanghai's real estate market, because increasing land prices indicated investors' confidence and the real demand in the market. In March, a Hong Kong company topped 20 international bidders to win a 6,627 sq metre site by paying a record US$1,817 per sq metre. The site, in Shanghai's luxury residential district of Xuhui, was the municipal government's first public tender this year. Mr Gu said real estate investment growth would drop in the long term because the supply of new land in the city was limited. Most of the potential land lots had, over the past two years, been contracted for development. He said the government should find new land sites as a matter of urgency.