Will property management become Chinese developers’ new cash cow?

China’s developers, facing the government’s heightened clampdown on the real estate sector, are increasingly focusing on long-term bets like property management even though these investments may take years to bear fruits.

Dozens of developers have spun off their property management businesses, while seeking to strengthen their financial muscles to compete in a fast-growing market that is expected to hit 1.2 trillion yuan (US$180 billion) in five years, according to research organisation, China Index Academy.

“Developers increasingly view property management as a segment that generates stable cashflow and raises brand awareness,” said Ouyang Jie, senior vice-president of Shanghai developer Future Holdings. “A stock market listing is also targeted by a group of developers amid their bullishness on the business.”

At least two property managers separated from developers – Zhejiang Nacity Property Management and Guangdong Country Garden Property Service – have submitted initial public offering (IPO) applications on the A-share market.

Another estimated 50 property service firms are listed on the mainland’s over-the-counter equity trading system, known as the new third board.