Records of the Press Conference for the Publication of the Sales Results of Evergrande Real Estate Group in September, 2010

Time: 10/11/2010
Place: Floor 5, Phase I of Taikoo Plaza, Hong Kong

Host: Good afternoon, friends from the media! Welcome to the Press Conference for the Publication of the Sales Results of Evergrande Real Estate Group in September, 2010.
First, please allow me to introduce members of our management: Dr. Xia Haijun, Vice President of the Board and CEO of the Group, who is responsible for the daily operation of the whole Group. Dr. Xia has 16-year experience in the management of real estate development , and meanwhile, he holds a master's degree in business administration and a doctor's degree in industrial economics from Jinan University.
And here is Mr. Xie Huihua, our executive director and CFO.
And Mr. Lai Lixin, our executive director and vice president.
Next, let s listen to Mr. Lai s talk about the contracted sales in September.

Mr. Lai Lixin: In September, our group realized a total contracted sale of 5.1 billionyuan,15% over that of August, when our total contracted sale was 4.48 billion yuan , setting a new record of sales by the month in the year 2010: The total contracted sales area was 796,000 square meters, an increase of 13.4% compared with 702,000 square meters in August. The average contracted selling price was 6,411 yuan per square meter, an increase of 1.3% compared with 6,327 yuan per square meter in August.
In September, we saw rises both in the volume and price, with a newly-recorded sales amount in this year, in spite of the downturn brought on by the second round of national control measures.
The nationwide layout of our business and the large variety of our products guaranteed our continued excellent market performance.
In September, cities with significant contributions to the total contracted sales amount include Changsha, Shijiazhuang, Chongqing, Wuhan, Shenyang and Chengdu, realizing a balanced regional distribution.
The sales amount of several regions, including Wuhan, Guiyang, Tianjin, Changsha and Kunming, saw sharp rises compared with that of August, thanks to the several new projects launched onto the market and our effective promotional efforts.
Presently the Group has 48 projects on sale in 22 major cities across China.
The Group realized the total contracted sales amount of 35.6 billion yuan between January and September, an increase of 54.2% compared with 23.09 billion yuan of the same period of 2009. The total contracted sales area in the same period was 5.698 million square meters, an increase of 26.5% compared with 4.503 million square meters of the same period of 2009. The average contracted selling price was 6,248 yuan per square, an increase of 21.8% compared with 5,128 yuan per square of the same period of 2009.
From January to September, the Group has realized 89% of the contracted sales target of RMB 40 billion yuan we set for 2010, which translates into 117.5% of the total sales amount of 30.3 billion yuan of 2009, substantiating the competent execution and great potentials of the Group.
Our forward-looking, positive and flexible marketing strategies and our cost-effective products well recognized by the market guaranteed our remarkable increase in the contracted sales amount from 3.48 billion yuan in January to 5.1 billion yuan in September, against the sluggish market environment.
As we had realized 65.2% of the contracted target sales of the year between January and July, we initiatively adjusted our pace of sales in August and September. In September, in spite of the new national restricting policies, we realized a new record of monthly sales, further demonstrating the popularity of our products.
Ok. Let me stop here with my presentation and leave the rest of time for questions and answers.

Journalist: I have two questions. The first is whether the sales during the Golden Week was lower than expected, due to the purchase-restricting policy issued before the National Day.
And the second question. Will you adjust your target sales of the whole year since you have so far realized 89% of that target?
Dr. Xia Haijun: At the end of September, the national government issued a new policy aimed at influencing the real estate market. During the Golden Week, most of the real estate developers were affected by the new policy. However, the influence of the new policy on our Group is limited, as we operate mostly in cities of the second- and third-tier at an average price of 6,000 yuan per square meter.
So far, we are doing well in October. We will soon realize our target sales of 40 billion yuan. As we are approaching the year end, I don t think we will adjust our target for this year. We are sure that we will do much better than the target of our business plan for 2010. We raised our target from 30.3 billion yuan to 40 billion yuan this year and we are confident that we will significantly outdo our target by the end of this year. We owe much of our achievements to the fact that we have basically completed the layout of our operations in the second- and third-tier provincial capitals. We plan to find our way to the third-tier cities more in the future. We define the third-tier cities as mainly including cities and regions of competent economy besides provincial capitals. Thanks to the more rational layout and the reasonable selling price, we believe that the Group will see a great leap in the performance this year and next year.

HK Daily News: Do you have any data concerning sales in the Golden Week? After the purchase-restricting policy was issued the sales volume dropped significantly. How do you think of the sales in the Golden Week? Do you have any detailed data to support your comment?
Dr. Xia Haijun: It has been too short a time since the Golden Week and so far no statistic data is available. As to the Group, the performance during the Golden Week is lower than what we had expected. However, Evergrande s products, thanks to its low price, are still popular with the public and the Group did quite well compared with the same period of previous years and set a new record, although it was lower than expected. We will fulfill our target sales of 40 billion yuan in the near future.

Ming Pao Daily News: Do you have any detailed plan for your development in the third-tier cities?
Dr. Xia Haijun: Evergrande has summarized the experience of national expansion of the real estate enterprises. Major real estate developers focused on the first-tier cities, including Beijing, Shanghai, Shenzhen, Guangzhou and Hangzhou. This strategy was successful at the beginning of the 21^st century. Later, with the housing price rising sharply, the second-tier cities presented greater chance of development. Therefore, when Evergrande began its national expansion in 2004, it focused on the second-tier cities, meaning to take the lead in the real estate development of the second-tier cities. After several years of development, we have completed the strategic layout of our operations in the second-tier cities. Evergrande has become the leading brand of many such cities. Presently we believe that the third-tier cities will be the target of future development of the real estate industry of China.
This is because the real estate industry in the third-tier cities remain underdeveloped in spite of the strong house purchasing desire of the public. The land price is lower and there are few major real estate developers in such cities. Therefore, Evergrande will take the opportunity to begin real estate development and make Evergrande a leading real estate developer in such cities.
We believe that as we have established our status in the second-tier cities and gained a solid standing in the third-tier cities, our development philosophy focusing on the ordinary people will be appreciated by the public as our products are mainly sold in the second- and third-tier cities at an average selling price of about 6,000 yuan per square meter. That s affordable for most of the ordinary people in China. The rigid demand from this part of customers reduces the influence of fluctuation in the real estate industry of China on our Group.

South China Morning Post: My first question is: After the national control policy was issued for the first time, Evergrande lowered its price. Will there be any such plan? If there will, what s the basis for such adjustment?
And the second question: What different reactions of domestic residents do you think will have to this round of macro-control policy?
Dr. Xia Haijun: Different companies have different pricing philosophies. I have repeatedly mentioned our pricing philosophy that the price shall be decided to meet the need of the market and to be acceptable for the ordinary people of China. Now we can conclude that after the macro-control policy was issued at the end of April, our price at a discount of 15% established in Maywas appreciated by the ordinary people. After the adjustment, we saw excellent sales results with our products, with both satisfactory rising in the sales volume and selling price . This helped the Group to realize our strategy for the national layout of operations.
After the macro-control policy was issued at the end of September, the Group will price the products in reference to the market environment, but we will not implement a unified sales strategy nationwide. There are two reasons for this:
First, after the market-oriented adjustment implemented between April and September, our branches have achieved a comprehensive understanding of the market. They are able to make reasonable strategy for the sale of each product and there is no need for the Group to provide strategic guide.
Secondly, there is no suspense for us to fulfill the sales target of 40 billion yuan this year. The Group will adjust the pace of sale at the end of the year. Actually our pace of sale has been adjusted since August. The quantity of products to be sold will be adjusted in reference to the actual pace of sales of individual products. Such adjustment is made for the purpose of maintaining the reasonability of our pricing strategy following our basic principle for such adjustment. We need to generate reasonable return for our shareholders while meeting the needs of the public for housing products.
I expect that the sales target of the Group, that is, 40 billion yuan, will be realized in a short period.
Next, let s come to your second question. The public placed much expectation on the macro-control policy issued in April, as they think the macro-control policy would help reduce the price. Therefore, many potential buyers held a wait-and-see attitude. In comparison, the public still expect that the macro-control policy may help reduce the price, but not as much as in April. The public do not respond so actively to the macro-control policy as in April. The public now hold a more reasonable attitude to the policy adjustment. Potential buyers with rigid demand will buy in spite of the macro-control policy. Real estate products of reasonable prices will continue to sell. Therefore, we still expect a reasonable result as we believe in a market dominated by the rigid demand, an average price of 6,000 yuan per square meter is acceptable for most buyers.

Caixin media: Just a little more than one hour ago, Standard & Poor's held a telephone and television conference, considering that there will be a reduction of 10% in the housing price in the coming 6 to 12 months. What's your comment on the tendency of the real estate market and the sales volume?
Dr. Xia Haijun: With the new round of macro-control policy effective, cities with high housing price, such as Beijing, Shanghai, Hangzhou and Shenzhen, will be exposed to a greater pressure. Sales restriction and housing property tax are likely to be tried in such cities and there is a greater possibility that the housing price in such cities will fall. Presently in the second- and third-tier cities, the housing price is not high and there is a high rigid demand. So I think the influence of the new macro-control policy over such cities will be less and the adjustment of price in such cities will be less significant.
Caixin media: The adjustment was about 10% in April with the first macro control policy implemented. What an adjustment do you expect for the housing price in the first-tier cities?
Dr. Xia Haijun: I think the macro-control policy will wield a greater influence over key cities. The purpose of the central government is clear: to maintain the healthy and stable development of the real estate industry of China. It does not want sharp change in the housing price but hopes the housing price of key cities to be reduced so that they are within the capacity of most buyers. Therefore, the housing price of key cities is likely to see a significant adjustment. Yet, it is hard to foresee the extent to which the price can be adjusted at this time.

Ming Pao Daily News: Has Evergrande made any estimate as to the possible housing property tax, such as the rate? If a housing property tax is to be collected, what will be the likely influence over Evergrande, and over the entire real estate industry?
Dr. Xia Haijun: The housing property tax is a complicated issue, involving the property evaluation system and the definition of the housing property. There are many policies and supporting facilities to be completed. It is our opinion that it is not practical to collect housing property tax for all housing properties across the country. For key cities where it is necessary to exercise control over the housing price, experiment will be made to formulate effective measures to be implemented across the country. Therefore, the housing property tax will not wield an immediate influence over the national real estate industry.
Ming Pao Daily News: When do you think the housing property tax will be implemented and what rate is likely to be set in your opinion?
Dr. Xia Haijun: It is hard to say. There are a number of possible approaches. The tax may be based on the selling price, the current estimated value of the property or at the original value of the housing when it is purchased.
Ming Pao Daily News: Is it likely that trial work will begin within this year?
Dr. Xia Haijun: I don t think the trial work will be launched this year. Even if it is, it will be tried in key cities, as such cities are the target of this round of macro-control. The government has made it clear that the sales-restriction and housing property tax will be implemented in key cities. If the price does not rebound in revenge, the housing property tax policy will be formulated more considerate and complete as it will wield wide influence. So I don t think it is likely that the housing property tax will be implemented within this year. If the price cannot be effectively controlled and keeps rising, there is greater possibility that the housing property tax will be collected next year.
Ming Pao Daily News: Did you consider the avoidance of the housing property tax policy when you made your strategy to choose the third-tier cities for the real estate development of your Group?
Dr. Xia Haijun: Our purpose is to build houses of sound quality and affordable price for most buyers. Presently, the average price of our housing products at present is about 6,000 yuan per square meter, with a down payment of less than 200,000 yuan. With such market and pricing orientation, our business is not covered by the current housing price-related policies, and we are able to maintain the rapid development and level of profitability. Therefore, the housing property tax and sales-restriction policy have limited influence on our Group. In most key cities including Beijing, Shanghai, Hangzhou and Shenzhen, there is no housing product remaining to be launched except Shanghai. In comparison, the second- and third-tier cities have more products to be launched to the market and are less subject to the influence of the national macro-control policy due to their great potentials.
After this round of macro-control measures are effective, Evergrande will take strategies different from other real estate developers and take the opportunity to realize a higher-speed development.

Reuters: Just one or two hours ago, the government of Mainland China announced that a differentiated adjustment will be made to the reserve-related policies for a part of banks. What influence do you expect of such adjustment to the real estate industry of China this year?
You just said Evergrande will focus on the third-tier cities in its business development. Can you name a few cities of your choice? Have you already purchased land for development or are you planning to make investment on land for development?
Dr. Xia Haijun: The central government has been tightening the money market using various means available, including raising the reserve rate and controlling the loan. This will certainly influence the real estate enterprises. They have to sell real estate products in their hands for fund for further purchase of land to develop. As we expect, as a result of the tightened money market, some developers who have been saving its products for future or who are waiting for more favorable policies, will have to increase sales in this year or the first half of next year, for the purpose of reducing their dependence on the banks for funds. Therefore, the sales will grow from now until the end of this year.
The tightened money market will also generate reorganization of the industry. When granting loans, banks will select large-scale developers with adequate fund flow and better performance. With such selection, the national macro control measures will wield little influence on the cash flow of large-scale developers but major influence over small-scale developers. As a result, the industry will see a higher degree of concentration. Developers like Evergrande will see greater development in terms of scale, thanks to the opportunity for the reorganization of the industry. Such an opportunity will facilitate the healthy development of the real estate industry of china.
The land purchased and held in suspense by small-scale developers will be developed after such developers are acquired by large-scale developers, thus helping the healthy development of the real estate industry. The product quality can also be improved. Products developed by small-scale developers are often not well recognized by the buyers as they lack adequate experience in developing real estate products. After being acquired by large-scale developers, the land can be developed into housing products of sound quality. Viewed from this perspective, the macro-control policy will facilitate the healthy development of China real estate industry.
The tightened domestic money market will influence real estate enterprises that are domestically listed. Due to the tightened domestic money market, many enterprises will see difficulty in raising funds for development. However, those listed in Hong Kong will enjoy a more advantageous standing on the market, compared with those domestically listed enterprises, as they can raise funds from the international money market if necessary.
The third-tier cities mainly refer to the developed cities in well developed regions. We have our criteria for the selection of cities for our development, including the population and GDP of the cities as well as their distance from the second-tier cities. Some of our companies have started to operate in such cities. We find that the population of such cities are reasonably well off. For example, the economic circumstances of some third-tier cities in Zhejiang and Jiangsu Provinces are even more favorable than those of the second-tier cities. The selling price in such cities will not be substantially influenced by the macro-control policy.
On the other hand, as such cities are underdeveloped in terms of real estate industry, now it is a good opportunity for large-scale developers to take hold of the market by means of market differentiation. If we launch our products in such cities, it will attract those relatively richer buyers who wish to improve their living conditions. This is the business opportunity we have seen in such cities.

Hong Kong Daily News: The government is promoting the construction of indemnificatory apartments for lower-income population, at a much lower price. Do you think this will influence your pricing policy?
Dr. Xia Haijun: The indemnificatory apartment and the commercial apartment are for different markets. The former ranges from 30, 50 to 70 square meters while the latter is often over 70 or 90 square meters.
In terms of decoration, the former is often cost-oriented and often relatively cheaper materials are used while the latter often features high-grade decoration materials. Furthermore, those who buy commercial apartments are often from the middle class and they will not buy indemnificatory apartments, because the living environment, conditions and facilities cannot reach their expectations. Similarly, those who buy indemnificatory apartments are not likely to buy commercial apartments in short future. Therefore, they belong to different markets and will not have much impact on each other. Indemnificatory apartments for the disadvantaged group help maintain the stability of the society and the balance of income in China. But they will not have much influence on the commercial apartment market.

Host: We are sorry that we have to conclude this press conference as the time is up. Thanks for your attendance.