Capitaland Group has marched into the real estate market in neighboring Ningbo City in Zhejiang Province as it projects rising demand for homes in the port city whose distance from Shanghai will be shortened once a cross-bay bridge is completed.
The Singapore-based land developer paid 1.07 billion yuan (US$129 million) for the 98,413-square meter plot in Ningbo, 150 kilometers from Shanghai, the firm said recently.
Over the next three years, CapitaLand plans to build a residential development with about 1,300 apartments on the site in Ningbo, said the firm.
The project covering 225,050 square meters gross will also include the construction of an office tower and a retail block.
"The site is strategically located in the prime downtown area of Ningbo where there is strong demand for residential and commercial properties," said Lim Ming Yan, chief executive officer of CapitaLand China.
"Demand for homes will continue to grow in view of Ningbo's robust economic growth and its future development."
Some Chinese land developers have also shifted their focus to the surrounding real estate markets out of Shanghai where residential housing prices rose 19.1 percent in the first quarter of this year.
"The key issue to reduce operation risks is to spread investment into different markets," said Zhao Hanzhong, senior vice president of Gemdale Corp which has several residential projects in Shanghai.
Secondary cities in the Yangtze River Delta, such as Zhenjiang, Taicang and Wuxi, are sound locations for residential property investment at present, said Zhao.
An important international port for China, Ningbo's gross domestic product grew 15.5 percent in 2004, while its per capita urban household disposable income was the fifth highest amongst the Chinese cities.
CapitaLand's ambitious entry into Ningbo is also due to the city's important role in the transport system in east China, said experts.
Ningbo will be the transport hub along the eastern seaboard in Zhejiang Province.
Moreover, Ningbo will leverage on its proximity to Shanghai, which will be just an hour and a half's drive away with the completion of the Hangzhou Bay Bridge in 2007 compared to the present driving time of four hours.
"These developments will impact positively on Ningbo's real estate sector," said the statement.
CapitaLand has agreed to sell all its stakes in a wholly-owned project company, which owns a high-grade office building in Shanghai, to Goldman Sachs earlier this month.