New Model for Chinese Real Estate Developers: Fast-turn Around

BEIJING, Oct. 18 /PRNewswire-Asia/ -- Evergrande Real Estate, seeking
accelerated growth, sold 4.537 million sqm of floor space during the first
three quarters of this year, with sales revenue of RMB23 billion, a year-over-
year increase surpassing 150 percent. During the third quarter, the developer
sold 2.303 million sqm of floor space, with sales revenue reaching RMB12.33
billion. As such, the real estate player is expected to easily achieve its
sales targets of 5 million sqm and RMB30 billion for 2009. Going forward, the
developer plans to adopt a "scale plus brand" strategy, maintaining land
reserves of around 50 million sqm at any time, accelerating construction of
new houses and expanding sales, while improving quality of its products, with
the goal of achieving an annual sales target of RMB50 billion by 2011. Sina
Leju was the first media source to announce the release of this report, part
of which is as follows.
Fast-rising companies have always sought fast expansion based on a rapid
turn around in the sale cycle, allowing them to gain market share and build up
positions in the industry. Evergrande adopted this strategy in a move to
drive significant increases in results.
In the real estate sector, implementation of such a strategy calls for a
sustained healthy supply of land reserves and construction starts. Since
2006,
Evergrande has maintained its leading position in land reserves and the area
of new houses under construction across China. The report released by CRIC
(China) shows that as of the end of the third quarter, Evergrande owned land
reserves reaching 51 million sqm, becoming the largest landholder in the
Chinese property market. Adequate land reserves can help companies avoid
risks resulting from price fluctuations. Price increases in buildings always
lead to price increases in land, so healthy land reserves can provide a
guarantee that a company can maintain steady growth. However, Evergrande
doesn't maliciously hoard the land it buys. According to a CRIC (China)
report, Evergrande now has approximately 17 million sqm of floor space under
construction, becoming the developer owning the largest area under
construction in China.
The CRIC (China) report shows that companies seeking fast turn around of
assets don't look for huge margins on their sales, but rather seek a high
volume of sales, garnering larger market share and speeding up the turn around
through lower prices. Data shows that the average price for homes put on the
market by Evergrande was RMB5,329.5 per sqm for the first three quarters.
"Projects initiated by Evergrande are commonly cheaper than their
surrounding ones," said one market participant. Obviously, the developer's
marketing strategy is in line with its concept of "properties for the common
people".
At the beginning of 2006, Evergrande had on hand land reserves of only 3.1
million sqm, increasing to 51 million sqm by the end of Q3 2009. At the same
time, the property developer expanded its presence from Guangzhou and Foshan
to 23 cities. Evergrande's rapidly expanded sales results and land reserves
are mainly located in the country's second-tier cities.
A study pointed out that the large number of land reserves, an operating
model based on fast turn around and the impending IPO are driving companies,
such as Evergrande, to achieve a quantum leap in their development.
Evergrande is planning to achieve its annual sales target of RMB50 billion by
2011. At that point, the real estate sector's competitive pattern may change
in China.
For more information, please contact:

Kevin
Fax: +86-10-5895-1005
Email: Kevinmts@sina.com

SOURCE Sina Leju

Kevin, +86-10-5895-1005 (Fax), or Kevinmts@sina.com