Alibaba visit may open door for housing upturn

Updated: 2011-11-08 07:53

By Wang Ying (China Daily)

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SHANGHAI - Nearly 100 employees from Alibaba Group Holdings visited commercial property projects developed by Hangzhou-based Greentown China Holdings Ltd on Sunday in search of possible savings through bulk purchasing.

Cash-strapped developers have seen a slump in transactions due to the nation's tight policies to dampen the property market, and some analysts say the move may be part of a diversified marketing strategy to attract more clients.

The employees stand to win a sizable discount - possibly as high as 8 percent, based on the total property price - as a part of a special offer for Alibaba staff.

"In common with previous home-purchase visits, we informed our employees of the time, location and contact details, and they themselves decided whether or not to take part," said Tao Ran, vice-president of Alibaba.

According to Tao, Alibaba occasionally organizes this sort of trip to help employees find homes in Hangzhou, the capital of Zhejiang province.

However, some analysts have said that there's a connection between the bulk purchasing strategy and reports in the Chinese financial media that Greentown is facing challenges in terms of capital. The experts said that cutting inventory and replenishing capital would be a good way of overcoming any cash flow difficulties.

In an article on the company's website in November, Song Weiping, chairman of Greentown, dismissed market speculation that the property developer was facing bankruptcy. In the article, he claimed that the company was performing well, and was working on improving sales whiles also searching for opportunities to strengthen cash flow.

"Apparently, as Song's close friend, Alibaba's Chairman and CEO Jack Ma lent a helping hand by grouping his employees to pay a visit to Greentown's properties," said Huang Zhijian, executive director of the Uwin Real Estate Research Center in Shanghai.

According to Huang, the majority of Greentown's properties are aimed at medium- and high-end buyers, and this group - one that often buys houses as an investment - has been hit hard by the government's current curbs on housing purchases.

Developers are currently facing a vicious cycle: Those with "rigid demand" who are in urgent need of housing are unlikely to be able to afford Greentown's properties. However, potential purchasers cannot buy because of the government's restrictions on the market. As a result, Greentown has seen a slump in sales.

"By organizing such activity, the premier goal is to promote sales and replenish capital," said an employee from Greentown who declined to be named. He claimed that the company's capital conditions are worsening and said further promotional activities were an option.

Chen Sheng, deputy director of the China Index Academy in Shanghai, viewed the weekend's visit from a different perspective.

"It's well known that the fast development of the tech and Internet industries means that employees earn a comparatively higher salary than average, and it's smart to use discounts to attract these people," said Chen.

According to Huang, the condition of its capital base is a closely guarded secret for any company. "But when a property developer (such as Greentown), whose margin percentage only stays at 9, gives a discount of 8 percent, we know that it's in need of funds," said Huang.

China Daily