China HGS Acquires High-Quality Construction Land in Hanzhong

HANZHONG, China, May 31, 2011 /PRNewswire-Asia-FirstCall/ -- China HGS Real Estate Inc. (NASDAQ: HGSH) ("China HGS" or "the Company"), a leading residential and commercial property developer in China's southern Shaanxi province, today announced that the Company placed a successful bid for the development and use rights for 94.05 mu (approximately 674,897square feet) of construction land (the "Construction Land") from the Hanzhong Land and Resources Reserve and Exchange Center on May 18, 2011.

The Construction Land is located in the downtown area of Hanzhong city. During the auction and bidding conference organized by the Hanzhong Land and Resource Reserve and Exchange Center (HLRREC), China HGS placed the successful bid with a unit price of RMB 1.9 million/mu (approximately US$41 per square foot). The total land price is RMB 178.7 million (approximately US$27.5 million). The Company paid a deposit of RMB 100 million (approximately US$15.4 million) on May 13, 2011. According to the terms of the bid, China HGS is required to make the full payment of the land price and applicable taxes to HLRREC within 30 days after the bid (June 17, 2011). The Company plans to finance the balance from its cash reserves or from bank loans.

According to Hanzhong municipal government policy, China HGS is authorized to develop residential and commercial real estate projects on the Construction Land at a plot ratio of up to 4.0 (the plot ratio is the total gross floor area (GFA) divided by the actual land area). China HGS will therefore be allowed to develop residential and commercial properties on the Construction Land with an overall area of up to approximately 2.7 million square feet. As of May 1, 2011, the average residential property sales price in Hanzhong was approximately RMB 376/square foot (approximately US$ 57.9).

"We are delighted to successfully acquire this high-quality land resource, which we expect to make an important contribution to our business growth in the next several years," commented Mr. Xiaojun Zhu, Chief Executive Officer of China HGS Real Estate, Inc. "We are now in the process of project planning, design, and approval. Our preliminary plan is to break ground in October 2011 and develop a comprehensive residential and commercial property on this land with an overall GFA of up to 2.7 million square feet. China HGS will provide more detailed updates about this project as we complete the project planning and the government approval procedures."

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 second-tier and third-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, and 2009 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. 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.

SOURCE China HGS Real Estate Inc.