At present, according to incomplete statistics, investments in real estate for elderly care from various investors have exceeded RMB 210 billion. In September 2013, the State Council issued Several Opinions regarding Speeding up Development of Elderly Care Services, specifically providing that preferential and supporting policies should be established and perfected, investment should be increased and construction of an elderly care service system of Chinese characteristics should be promoted. After issuance of the Opinions, various investors rush to seize shares in the elderly care real estate market as they believe the value of this market is underestimated.

Among these investors, real estate enterprises and insurance companies are the main forces.  

By the end of 2014, more than 80 real estate enterprises in China, including Poly, Vanke, Sino Ocean Land, Greenland, Hopson, Wanda and Greentown, have entered into the elderly care real estate sector, injecting funds of over RMB 80 billion in total.

Currently there are 3 main models through which the real estate enterprises participate in real estate projects for elderly care: the first model is cooperation between the developer and elderly care service operators, such as Vanke Xingfuhui elderly care real estate project jointly developed by Vanke and Cherish-Yearn in Beijing; the second model is cooperation between the developer and health and medical enterprises, such as Citic Medical & Health Group Co., Ltd. incorporated by Citic Group; and, the third model is cooperation between the developer and local governments, such as the strategic cooperation agreement on health and elderly care project signed by Vanke and Changchun Municipal Government.

In recent years, many insurance companies have fully deployed their investments and operations in elderly care real estate market, such as Taikang Life, New China Life, Ping’An Group, Union Life, PICC, China Taiping and China Life Insurance. According to statistics, by the end of 2014, insurance enterprises have invested over RMB 70 billion in the sector of real estate for elderly care. Compared to traditional real estate enterprises, insurance investors have their own advantages in doing elderly care real estate business: firstly, they can combine the virtual insurance services with the physical medical and elderly care community to provide more diversified and comprehensive services; secondly, they can lease their properties with an option to buy and they have fund advantages for undergoing a longer cycle in the sector; and thirdly, they have many quality client resources.

Besides the real estate enterprises and insurance companies, state-owned key enterprises from other sectors also make investment in elderly care real estate. For example, Sinopec and HydroChina invested up to RMB 16 billion in two elderly care real estate projects respectively in Sichuan and Chongqing in last April and May.

Despite the rapid growth of real estate for elderly care in recent years, there are many problems behind it.

The land for building elderly care real estates and facilities is in shortage. Under the present land policy in China, the land for elderly care use has not yet been separately or officially allotted. The percentage of approved real estate projects for elderly care is high enough, so that the cost of land for building elderly care institutions is rather high.

The models for operating elderly care real estate business are immature. The models for operating elderly care real estate business in China are still under-developed. Selling properties is still the main means of business operation in the current elderly care real estate projects. However, the elderly city dwellers’ homeownership rate in China is higher than the average level in the world. What is in shortage for the elderly is not properties, but services. Binding services to the sale of real properties will be subject to big risks.

A clear marketing position and profit-making model is missing. Enterprises may be deeply concerned about the long-term investment and short-term return on investment as the elderly care real estate business requires high investment on the early stage, sees a slow speed and long cycle of return on investment, and brings high pressure on the operating funds. At present, there is no defined credit system from financial institutions for elderly care real estate businesses and there is little drive for the financial institutions to release loans in this sector. Except for some banks which provide credit funds for this sector, other financial institutions such as foundations, trust corporations and investment banks seldom involve themselves in it.