Distressed real estate opportunities in China to remain elusive for foreign investors

Industry oversupply and a continuing anti-graft campaign are pushing up expectations that a rising number of property firms, particularly those that are financially stretched, will have to sell assets cheaply in mainland China. But experts say foreign investors will still find it hard to take advantage of such opportunities.

They are keenly watching how US hedge fund Farallon Capital Management will push ahead with its recapitalisation of debt-ridden developer Kaisa Group Holdings, once a top redevelopment specialist in Shenzhen but now fighting for survival after local authorities banned presales of some of its property projects a year ago.

Some distressed assets are auctioned by Chinese courts and transactions need to be done in two weeks, which make it almost impossible for foreign investors to conduct sufficient due diligencePAUL GUAN, PAUL HASTINGS

The property development business, still lucrative even though margins are dwindling, is a key target in Communist Party general secretary Xi Jinping efforts to rid the party of corruption.

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