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Global investment bank puts its money into Asian property market

Many Chinese and Indian developers are struggling to complete ambitious projects because local banks have clamped down on lending to the construction industry and a stock market slump has closed off equity raising through initial public offerings.

Foreign investors have also been shying away from markets where risks, as well as returns, are traditionally high.

But the investment bank, which has fared better than some Wall Street rivals because of a smaller exposure to the US subprime mortgage slump, is confident this is the right market.

'It's a fantastic opportunity for us at a time when a lot of our competitors are scaling down because of difficulties accessing their balance sheet,' said Bryan Southergill, the group's head of Asia real estate.

'Last year many private equity players were clamouring for exposure in India and China but it was hard to get in. Now sellers' expectations have come down and what they're asking for is much more reasonable, but the private equity and hedge funds have really pulled back and are more cautious,' he added.

In China, the lending clampdown was inspired by a government bent on cooling a market where average home prices have doubled since 2002 and high-end apartments prices have risen much more.

Beijing has also raised interest rates, imposed taxes on capital gains and land appreciation, stopped non-residents from buying apartments and employed a use it or lose it policy to deter land speculation.

In India, banks are banned from lending for land purchases and the central bank has raised interest rates and bank reserve ratios and clamped down on developers borrowing offshore.

Housing markets that were booming have slowed, with prices in the New Delhi area and the southern Chinese cities of Guangzhou and Shenzhen dropping as much as 25% in the last year.

JPMorgan also plans to open a property investment desk in Japan. But it is also warning that the Asian property markets are not immune from the global economic downturn. 'Last year people were saying that the global credit crunch wouldn't affect Asia much, but as the saying goes, when the US sneezes, the world catches a cold,' Southergill said.

'The US has got pneumonia right now.'

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