Real estate asset securitization has become the rage as the Chinese stock market continues to scale new heights.

"Real estate developers are rushing to inject property assets into their listed companies to cash in on the stock market boom," said Zhang Luan, a senior analyst at Haitong Securities.

These deals, amounting to hundreds of billions of yuan, have greatly increased the supply of scrips to satisfy the seeming insatiable demand of investors. But the uneven standard of property valuation could create new risks as the real estate markets, especially those in the major cities, are seen to be overheating.

From this year, a total of 35 real estate companies listed on the Shanghai and Shenzhen exchanges have won approval from the China Securities Regulatory Commission to issue new shares, accounting for over 40 percent of all listed A-share real estate companies.

The total capital raised from new share issues amounted to 94.16 billion yuan (US$12.47 billion) till August, according to statistics compiled by China Securities News.

The latest deal was by Shanghai Industrial Development Co Ltd, directly owned by the State-owned Assets Supervision and Administration Commission of Shanghai Municipal Government. It signed a contract with its parent company Shanghai Industrial Investment (Holdings) Co Ltd and its holding subsidiary on August 13 to sell 160 million shares at 22.81 yuan apiece to buy shares in real estate companies and land.

Besides, Shanghai ShiMao Co Ltd announced on June 7 that it would issue around 700 million shares to buy 12 commercial real estate projects from its parent and holding companies.

Beijing Tianhong Baoye Real Estate Co Ltd said on August 21 that it will issue 550 million shares to buy 12 main assets of Beijing Capital Development Holding (Group) Co Ltd, Beijing's largest real estate developer.

An analyst at an investment consultancy said real estate companies inject the land, appreciating rapidly, into the listed entities to get a much higher premium.

"They raise the money in the property market and then inject it into the securities market to bump up stock prices. This has become regular, and the risk is beginning to transfer from the property market to the securities market," he said.

"Listed real estate companies are more willing to raise money from the securities market, where they can have a higher premium," said Zhang Luan at Haitong Securities.

"But the high price-earnings (P/E) ratio of today's real estate market is not sustainable and may face correction," she said. The P/E ratio of real estate stocks in Hong Kong is only 20 percent of that on the mainland. In Hong Kong, the average P/E ratio of top five stocks is only 20, while that on the mainland is as high as 117, according to statistics from Wind, an information provider.

However, Matthew Brailsford, director of the investment department at Savills (Shanghai), said real estate companies are not trying to transfer the risk. "It's just a good opportunity for listed companies to capitalize their land reserves," he said.

"From an unlisted company's perspective, the risk is that the listed entity's share price will fall below the price at which the land was exchanged, but they would have an alternative to realize cash more readily," said Stephen W.S. Ip, partner of transaction services at KPMG.

"If a company can increase its land reserves at a reasonable cost so that it can develop the land for a profit, it can enhance its net asset value, which is important for a listed company if it seeks to raise funds from the stock market," said Ip.

"Housing prices in China are clearly too expensive and going up too fast right now, but the price may continue to rise next year as well," said Brailsford.