Dragon Land moves into local housing in China

 
The Business Times | Jul 11, 1998
By: Lu Ning


It will build 1,500 units in Changzhou for the local Chinese

[SINGAPORE] Mainboard-listed China property developer, Dragon Land Ltd, officially entered the potentially huge Chinese local housing market byannouncing its first local housing project in Changzhou, China.

A preliminary agreement was signed yesterday between Dragon Land's subsidiary, Second Dragon Development Pte Ltd, and the Changzhou city government.

Under the agreement, the Singapore company will build 1,500 units for the local Chinese in an area within the Singapore Townsville where it has developed luxury condominiums catering mainly to overseas investors.

The estimated total built-up area will be around 172,500 square metres with the size of each unit ranging from 100 to 125 sq m in five-storey walk-ups.

The total cost of the development is put at approximately 153 million yuan (S$31.7 million). In signing the agreement, Dragon Land chairman Peh Chin Hua said he expects construction to start in September, and the project would take about two years to complete.

Mr Peh, a Member of Parliament for Jalan Besar GRC, said the project financing will come from the proceeds of the company's initial public offer in February when it raised some $4.3 million, as well as from sales of existing projects and pre-construction sales of properties to be developed.

Yu Zhen Xin, Changzhou's party secretary, said the city has no restrictions on sales of housing units before they are completed. Mr Peh is upbeat about the prospect of developing housing for the local Chinese as China has started to privatise housing.

He disclosed that his company is negotiating on "several local housing projects" in a number of "major cities" in China. "The negotiations are in advanced stages," said Mr Peh, who expects to launch them by the end of October.

Dragon Land has invested about $70 million in property projects in China, and has accumulated a landbank of some 1.7 million sq m in Anxi, Changzhou and Qingdao.

The new local housing development project in Changzhou is priced at around 1,200 yuan per sq m which, according to Mr Yu, falls into the lower end of the local housing market.

Although Dragon Land will develop the project on its own, Mr Yu promised that the city government will help with marketing and constructing support facilities. He said the demand is strong as an estimated 200,000 local residents out of a city population of 850,000 are expected to buy their own homes.

Mr Peh said that local housing projects would generate a 15 per cent rate of return. The new project would not have any effect on the company's earnings for the current year.

He also said the company is sticking to its $5.37 million earnings forecast for the whole year. In April, it reported a $2.3 million after-tax interim loss.