Widespread defaults unlikely, says China developer

Mark Ralston | AFP | Getty Images

The recent collapse of a Chinese developer has raised fears over the stability of the mainland property sector, but Vincent Lo, CEO of Shanghai-based developer Shui On Land, says defaults will remain contained.

"I don't expect you'll see too many of these collapses because the market is actually still quite healthy," Lo told CNBC on Monday. "If you look at 2008-2009 [global financial] crisis, only one company was in trouble."

Read MoreDefault risks trigger fresh fears over China property

Earlier this month, Zhejiang Xingrun Real Estate, a property developer based in a small city south of Shanghai, defaulted on almost $400 million of bank loans, highlighting the vulnerability of small, highly levered developers in an environment of slowing sales.

Property sales in terms of floor space dropped 0.1 percent and fell 3.7 percent in terms of value in the first two months of the year.

However, Lo says that smaller or highly geared developer may have to sell off some of their assets given that banks have turned more cautious in their lending to the property sector over the past quarter.

Read More China real estate to slow-the question is how much

This may present some opportunities for larger developers to snap up assets at discounted prices.

"For myself, the commercial properties would be what we're more interested in, [they are] something relatively new in China and not too many developers are very good at running them," he said.

Plans to spin off Xintiandi

Lo says the company's plans to spin off its subsidiary China Xintiandi are on track, and it hopes to list the unit in Hong Kong in the second half of next year.

China Xintiandi is an owner and operator of premium commercial properties in China. Its portfolio under management includes retail, office, hotel and entertainment properties in Shanghai, Chongqing, Wuhan and Foshan.

"It will give the investors differentiation. If you want to go for a developer you can go for Shui On Land. If you want to go for a rental, very steady income then its China Xintiandi," he said.

Shui On will hold about 50 percent of China Xintiandi and is looking for strategic investors for the rest, Bloomberg reported earlier this year.

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  • Diana Olick

    Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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