DEVELOPERS in China are accelerating a push into asset-light businesses such as property services and commercial real estate.

KWG Group Holdings, CIFI Holdings and China Resources Land were among developers that listed diversification plans along with their recent financial results.

Chinese developers have for years relied on a build-to-sell quickly model to target rapid growth. Premier Li Keqiang told an annual meeting of parliament last month that the real estate sector should explore a new development model.

KWG Group said it would develop “multiple race tracks” of diversified businesses including residential, shopping malls, office buildings, hotels, and health care.

China Resources has also chalked out plans to deepen its role as an “urban integrated operator” in developing not only residential but also commercial and industrial real estate.

Company president Li Xin told an earnings call last month the firm will grow the diversified businesses bigger to support the “high quality development” laid out by the Central Government.

Smaller peer CIFI aims to increase non-property development income to up to 40% of its total, up from mid single digit now, by growing businesses including property services, contract building, and property-related technology.

Some developers, however, said the pain inflicted by diversification outweighed its contribution in bolstering revenue in the short to medium term.

The chairman of China Vanke, the country’s No. 2 property developer by sales, told reporters and analysts last month its diversification move, implemented since 2014, was one of the reasons why its profit plunged 46% last year.

“The cost of exploring multi-race tracks simultaneously was much higher than expected,” said Yu Liang, adding the impact on its bottomline became more obvious last year.

“Recurring income businesses take a long time to break even,” CGS-CIMB Securities (Hong Kong) Ltd. analyst Will Chu said, adding mid to large developers will have an advantage because they have relatively more cash on hand to spend. “But the small-to-medium private developers ... will fade out from the market eventually as their land-bank dries up,” he said. (SD-Agencies)