A Hong Kong property group controlled by billionaire Robert Kuok said that it would review its US$600 million development project in Shanghai, following a change in the government's policy on state-owned assets.

In a statement to the Hong Kong stock exchange yesterday, Kerry Properties and its hotel affiliate Shangri-La Asia said their hotel-office-residential complex project in downtown Shanghai had not obtained government approval due to recent changes in the Chinese laws on the disposition of state-owned assets.

The announcement came at a time when the Chinese Government has implemented a series of measures to further curb speculation in the country's property market.

The delay is closely watched by many overseas investors who have been pouring money into the country's soaring property market. They fear the latest government measures might further increase the uncertainties on the already volatile property market, said Michael Hart, head of research at Jones Lang LaSalle in Shanghai, an international property agent.

A senior executive of another international firm said: "I think the delay may be because the property developer wants a bigger size of residential or commercial plot in the project, which goes beyond the current regulations in Shanghai."

But he said he was confident that Kerry and its partners would resolve the issue because of Kuok's excellent relationship with the mainland government both at the national and local levels.

For that reason, he said he believes the government's clampdown on the property market will not have a big impact on the delay as the land has already been bought.

What would cause overseas investors to pause would be the highly restrictive building areas allowed under the present regulations. In Shanghai, for instance, the floor area ratio of the residential project is not allowed to exceed two and a half times the land area downtown, and the total floor area of the superstructure on a 100-square-metre site is limited to 250 square metres.

"It is a very restrictive rule which means that only a maximum of five storeys can be built on sites in the downtown area," the executive said. "However, it is open to negotiation between the developer and the authorities on a case-by-case basis."

Last May, Kerry Properties said it would team up with Shangri-La Asia to develop a multi-purpose development on a 495,000 square foot site in Jing'an District.

Kerry owns 50.5 percent of the project while Shangri-La, Asia's largest luxury-hotel operator owns 48.5 percent, and a local partner holds 1 percent.

(China Daily April 15, 2005)