Mainland's cemetery business boom

The lucrative business has attracted numerous companies to plunge into cemetery developments, including those which intentionally switch their business to this sector.

The aforementioned Sage International, formerly known as Info Communication Ltd which only organized exhibitions events, started acquiring cemetery assets and entered into the cemetery business in 2011.

Chairman Chui describes the business as building homes for the dead which is "a more profitable one" compared with residential development on the mainland, with the gross margin reaching over 40 percent in the industry.

However, a research report by SBI E2-Capital last year indicated that gross profit margin of Sage International "could be between 60 percent and 80 percent" in line with the high end segment of the industry.

Other Hong Kong-listed companies, including China Boon Holdings Ltd and Hong Kong Life Group, which were both technology companies, have also joined forces to explore the sure-win cemetery-development business on the mainland in recent years.

According to an annual report released in June, China Boon's gross profit margin for the full-year ended March 31, 2012 reached 74 percent compared with 58.4 percent registered a year earlier.

Hong Kong Life's gross profit margin for the three months ended March 31, 2012 has surged to 67.6 percent, the company told the city's stock exchange in May.

The cemetery sector's gross profit margin is much higher compared with the average gross profit margin of 39.38 percent among mainland developers in 2011, according to FinChina data.

Not only have the tomb prices per square meter surpassed residential prices in respective cities, at the same time, unlike the 70 years' property ownership in China, most of these private cemetery developers only signed a 20-year contract with the buyers.

"In theory, the owner of the tomb needs to renew the contract based on market prices at that time when current contract expires 20 years later. If they don't, we will clear up his tomb and bury the cinerary casket in other places," said Chui.

However, not everyone has fully realized the 20-year-ownership clause in the contract with the cemetery developers, including Wang who purchased the two graveyard sites five years ago.

While advised to read the certificates thoroughly, Wang just realized that her right on both the tombs would also last 20 years only.

Speaking in dismay, Wang said if the salesperson had stated the restrictions to her clearly before she signed the contract, she would probably have had second thoughts about the deal.

"It would become a big burden to my prosperity to renew the contracts in the future, which seems endless to me," Wang said.