Developers worried about capital strengths

Facing stricter housing policies, developers have slowed down land purchases and diversified their capital.
Vanke, the country's largest developer by sales, will reduce its land purchasing "to pass the difficulty times," Tan Huajie, board secretary of Vanke, was quoted by caijing.com as saying Thursday.
Speeding up capital turnover has been the mainstay of Vanke's strategy this year, said Tan.
"Expanding ways of financing is a pressing matter for developers, because these suppressing policies might exist at least one or two years," said Kitty Cheung, head of investor relations for Beijing Capital Land (BCL).
"Developers will be much more cautious when they purchase land," Cheung said.
Calls to other developers such as Longfor Properties Co Ltd and Agile Property Holdings Limited received similar answers.
China's central bank has cut its 2011 lending target for banks by as much as 10 percent, the Securities Journal reported in January. In effect, banks can now lend between 7.2 trillion and 7.5 trillion yuan (between $1.09 trillion and $1.14 trillion) this year.
The central bank has also asked banks not to lend more than 12 percent of their full-year targets in January, the newspaper said. However, in January alone, Chinese banks extended 1.04 trillion yuan ($158 billion) in new loans.
Consequently, developers are eyeing real estate funds.
"Previously, only certain small-sized developers wanted to cooperate with us, but recently bigger listed developers have begun negotiating with us," Cao Shaoshan, president with Orizon Capital Co, told the Global Times Thursday.
The return rate for Orizon's equity investment is around 25 percent, according to Cao.
Though the 7 percent financing costs from real estate funds for the developers is higher than the average banks' development loan rate, the developers still maintain a high level of interest, Cao said.
Cao said Orizon's total investment this year will amount to around 1 billion yuan ($152.06 million) this year, more than double last year's returns.
"We could offer capital supports to help the developers purchasing land," Shi Yang, president with J&J Assets Management Ltd, also told the Global Times Thursday.
Following efforts made in January by the central government to curb property speculation by limiting home buying for multiple homeowners, 18 cities unveiled executive guidelines as of Thursday.