As China's housing boom cools, insurer Ping An and developer Cifi shift focus to rental market

The real estate investment platform of Ping An Insurance has joined Shanghai-based developer Cifi Holdings to launch a 10 billion yuan (US$1.5 billion) rental home investment and management business, targeting affordable living for those who have yet to get on the housing ladder.

The two companies announced on Thursday they would co-invest in a batch of rental home projects in first- and second-tier mainland cities over the next three years.

The investment and management platform will also engage in acquisition, redevelopment, management and asset securitisation of the rental home businesses, they said.

Zhu Zhengjian, general manager and chief operating office of Ping An Real Estate, said the company would seek to boost total assets of rental homes to 200 billion yuan in 10 years by securing more partnerships.

The announcement marked a milestone in China's rental home sector because it was the first time that a cash-rich institution and a leading developer committed to building and managing residential properties for lease, an untapped area in the country's real estate market.

More than 200 million people are renters in China, according to global property services firm JLL.

In Shanghai, the demand for rental homes is expected to hit 4 million units, far exceeding the available supply.

Beijing has been encouraging growth in the home leasing market to accommodate new urban immigrants who lack the means to buy.

The central government stipulated in 2017 that tenants and homeowners enjoy equal residence rights and equal access to public services such as education and health care, a move intended to make renting more attractive to young professionals.

"Residential properties for leasing are increasingly becoming a new force to help ease the housing problem," said Lin Zhong, chairman of Cifi. "This is a market with greater potential and Cifi hopes to be a top player in the segment."

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Cifi and Ping An are developing their first rental project at Pujiang Town of Minhang district in Shanghai.

The development, after completion, will offer 2,100 flats for lease.

The six major cities of Shanghai, Beijing, Guangzhou, Shenzhen, Hangzhou and Chengdu will have 750,000 newly completed rental homes by 2022, reflecting a sixfold increase over the current stock of 135,000 units, according to JLL.

Ping An Real Estate, whose parent is one of the mainland's most powerful financial conglomerates, has assets of more than 340 billion yuan under management.

Cifi, one of the fastest-growing developers in the country, posted a 36 per cent jump in underlying profits to 5.54 billion yuan for 2018 on revenue of 42.4 billion yuan.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.