China HGS Joins 1.44 Million sq. ft. Primary Land Development in Hanzhong

HANZHONG, China, August 29, 2011 /PRNewswire-Asia-FirstCall/ -- China HGS Real Estate Inc. (NASDAQ:HGSH) ("China HGS" or "the Company"), one of the largest residential and commercial property developers in China's southern Shaanxi province, today announced that its operating entity in China, Shaanxi Guangsha Investment and Development Group Co., Ltd. (the "Guangsha Group"), was recently qualified to join the primary land development of 199.5 mu (approximately 1.44 million sq. ft.) of construction land (the "Target Land") in Hanzhong municipal territory. The city of Hanzhong has a municipal area of approximately 27,000 square kilometers (6.7 million acres), with a population of 3.7 million.

Based on the primary land-development agreement between the Guangsha Group and the Hanzhong local government, the Guangsha Group will provide RMB 119.7 million (approximately $18.7 million), which will be completely self-financed, to the Hanzhong local government for the land requisition, clearing, and relocation of existing residents. The Hanzhong local government will be responsible for the organization and implementation of the primary land development. This investment figure is based on an estimated unit cost of RMB 600,000 per mu (approximately $100,000 per mu, or $13 per sq. ft.). The land requisition, clearing, and relocation of existing residents are expected to be completed by February 2012. The Target Land will be allocated to public real-estate developers via an open-bid process during the second calendar quarter of 2012. Following the completion of the bidding process, the Guangsha Group will share the net land-sales proceeds (the gross land sales proceeds minus the funds provided by Guangsha Group for the primary land development) with the local government.

As of August 20, 2011, the Guangsha Group had made payments totaling RMB 20 million (approximately $3.1 million) to the Hanzhong local government. The remainder of the funds will be provided in installments to the Hanzhong local government by February 2012.

The Target Land is located on the eastern side of the current Hanzhong downtown area and represents an important part of Hanzhong's future expansion plans. In accordance with the Hanzhong city's 2010 development plan, the downtown area of Hanzhong will be expanded toward the eastern side of the existing city center during the next ten years. Based on the current real estate market situation in Hanzhong and the internal forecast of the Guangsha Group, the unit price of the Target Land is expected to increase to at least RMB 1.2 million per mu (approximately $200,000 per mu, or $26 per sq. ft.) by the second calendar quarter of 2012.

"We are very delighted to successfully join the primary land development of the Target Land, which reflects China HGS's market leadership in Hanzhong and the government's trust in our capabilities," stated Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS Real Estate, Inc. "Along with the rapid economic development and population expansion in Hanzhong and its surrounding areas, the property market in Hanzhong is also robustly expanding. The Target Land we secured offers significant room for value appreciation, since it will become part of the central area of Hanzhong's new city center. In addition to the profit expected from the primary land development, we will also review the residential and commercial property development plan on this land in order to determine whether to participate in the open-bid process before it starts in the second calendar quarter of 2012."

Note: Primary land development refers to those land development activities that are organized by the relevant government agency, sometimes in cooperation with local real estate developers. The government agency is responsible for the administration of land development in accordance with the requirements of the relevant urban plan and civil infrastructure so as to meet the standard preconditions for a land grant, including the payment of compensation for the requisition of the land, the removal and resettlement of existing land users, land clearing and the construction of municipal infrastructure and public facilities.

About China HGS Real Estate Inc.

China HGS Real Estate Inc., through its wholly owned subsidiary, Shaanxi Guangsha Investment and Development Group Co., Ltd., specializes in real estate development in China's third-tier and fourth-tier cities. The Company's real estate properties include multi-layer, sub-high-rise, and high-rise apartment buildings. The Company possesses the national Grade-II real estate qualification and was ranked as the No. 1 property developer in Hanzhong, Shaanxi Province in terms of market share in 2007, 2008, 2009, and 2010 successively.

Forward-looking Statements:

This press release contains certain statements that may include 'forward-looking statements'. All statements other than statements of historical fact included herein are 'forward-looking statements'. These forward looking statements are often identified by the use of forward-looking terminology such as 'believes,' 'expects' or similar expressions, involve known and unknown risks and uncertainties. These statements relate, but are not limited to, demand for property in Hanzhong and its surrounding areas, legislation affecting real estate on the national and local level, and property pricing. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.