China HGS to Develop a Large-Scale, Economically Affordable Housing Project in Cooperation with the Yang County Government

HANZHONG, China, August 23, 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"), recently signed an agreement (the "Agreement") with the Yang County government for the construction of a large-scale Economically Affordable Apartment housing project (the "EAA Project") with an overall ground floor area (GFA) of 40,000 sq. m. (approximately 430,556 sq. ft.). Yang County is the largest administrative district of Hanzhong city, which has a total population of about 440,000.

According to the Agreement, the Guangsha Group will complete the construction of the EAA Project, which will be located on the same property as China HGS' current Yangzhou Pearl Garden project, by the end of December 2012. Economically Affordable Apartments refer to residential apartments targeting low- and medium-income urban households at a modest level of profitability for developers. As in many other countries, Economically Affordable Apartment projects are initiated, planned, and organized by the national and local governments to provide housing for low-income citizens and are often delivered through cooperation between local governments and local real-estate developers.

The Guangsha Group's EAA Project is the first large-scale economically affordable housing program approved by the Yang County Government. In return for undertaking this government-initiated project, the Guangsha Group will earn a moderate return on the project and enjoy certain favorable policies and compensation from the Yang County government, such as discounts for future land acquisitions, expense or tax exemptions or deductions. It will also receive a certain amount of land resources at a different location corresponding to the EAA Project area, in addition to other benefits.

The EAA Project is comprised of 502 apartment units with a total GFA of 40,000 sq. m. (approximately 430,556 sq. ft.). It is anticipated that the overall project will be sold by the end of this calendar year with expected project revenue of RMB 82.0 million (approximately $12.8 million).

"As the leading real estate developer in the Hanzhong property market, we appreciate the opportunity to bring benefits to the local community, while at the same time generating a return for our shareholders," stated Mr. Xiaojun Zhu, Chairman and Chief Executive Officer of China HGS Real Estate Inc. "Through the construction of this Economically Affordable Apartment project in Yang County, we hope to provide a better living environment and conditions for low- and medium-income local households. At the same time, we also look forward to increasing the scope of our cooperation with the Yang County government to provide further positive contributions to the long-term development of local real estate market."

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.