(Yicai) Jan. 24 -- More Chinese property developers are branching into providing general contractor services, where they are responsible for the planning, building and delivery of the development according to the specifications of the client without shouldering any risk, amid a slowdown in the real estate sector.

Many developers are hesitating to buy land due to the huge costs and risks involved, but they can generate a new revenue stream, keep their key talent from leaving and continue daily operations by acting as a third-party construction contractor, an industry insider told Yicai.

Newly signed general contractor contracts jumped 56.3 percent last year from the year before, according to statistics from think tank the China Index Academy. Construction areas under these type of contracts likely reached 170 million square meters in 2023 and should stay at this level until 2025, according to BOC International.

Urban renewal projects, government-subsidized rental housing projects as well as projects that are required by local government to ensure a timely delivery of pre-sold properties all present huge opportunities for general contractor service providers, the person said.

Over 90 real estate developers have set up construction contractor subsidiaries since 2021, including some large firms as well as small and medium-sized regional developers.

State-owned enterprises and investment firms owned by local governments are not good at developing real estate projects and they need to hire developers to build the properties once they have obtained the land development rights, said Du Haomin, a real estate analyst at Sinolink Securities.

Only 38 percent of the land bought by government-owned urban investment companies started construction in 2021, an improvement on the 8 percent in 2022, but still below the general development rate. This leaves much room for developers which provide general contractor services, according to the CRIC Research Center.

But as more companies enter the field, competition will get stiffer. Eventually, only around five to eight leading developers with strong nationwide capabilities and particular strengths in specific areas such as hotels, medical institutions and sports facilities, will survive, said Hao Yibin, chairman of Gemdale Management, the construction contractor service arm of major developer Gemdale Corp.

Editors: Tang Shihua, Kim Taylor