FOREIGN private equity firms appear to be dipping their toes back into the residential real estate market in China, after a nearly four-year government campaign to rein in sky-high housing prices curbed the appetite for investment in the local housing market.

    An Asia-focused real estate fund run by Blackstone Group made an offer this week to acquire Chinese property developer Tysan Holdings Ltd. for HK$2.5 billion (US$322 million).

    In July, Texas-based private equity firm Century Bridge Capital invested US$44.4 million in a joint venture with Hong Kong-listed property developer Coastal Greenland Ltd. to build a middle-income residential project in Wuhan, a city in Central China.

    Meanwhile, UBS AG said last week that its asset management unit is teaming up with a district government in Shanghai and an insurance company to start a public housing investment fund that could use public and private financing to help China build more low-cost homes.

    Since 2010, the Central Government tightened property sector controls, aiming to rein in runaway house prices. But with growth fragile and the real estate sector a significant contributor to demand for everything from steel to furniture, policymakers have taken a more-relaxed approach in 2013, and property sales and prices in many cities have rebounded.

    This has prompted some foreign institutional investors to resume their investments in China’s property market.

    Overseas-based real estate managers have raised US$1.6 billion in closed-end funds for residential property investment in China this year, higher than the US$800 million raised in 2012 and the US$400 million in 2011, according to data tracker Preqin.

    Blackstone said its investment in Tysan, a small developer that engages in mainly residential property development and investment in Shanghai, Tianjin and Shenyang, is “an opportunity to enlarge its footprint in the real estate market” in China.

    Century Bridge said last month that its investment in Wuhan is “right in line with our strategy of investing in middle-income, residential housing in tier-two cities, which targets opportunities that capitalize on China’s larger urbanization trend.” Century Bridge chief executive Tom Delatour said in an interview that “in China, you’re now seeing good sales, slightly rising housing prices. The returns are solid.”

    Foreign investors also are looking at niche sectors in the housing market, such as serviced-residence projects in major cities, to limit risks stemming from policy curbs on home purchases, real estate analysts said.

    To be sure, many foreign funds still aren’t that enthusiastic about the residential property sector.

    Besides having to jostle with local players, the uncertainty of the Central Government’s policy moves and the anticipated expansion of a property tax nationwide are holding back foreign investment.

    (SD-Agencies)