Foreign investors are making forays into China's property market despite clouds gathering over the sector. Foreign companies face restrictions on property development in China, but many are pouring in via tie-ups with local partners.

The world's biggest private equity firm Blackstone, for example, recently reached an agreement with Hong Kong-based Great Eagle Group to back its high-end apartment project in the northeast port city of Dalian, Liaoning Province. Prior to this, the UBS Global Asset Management Ltd. teamed up with China's Gemdale Group to launch an investment fund targeting real estate development in second-tier cities.

China has poured cold water on the sizzling housing market and put a squeeze on bank loans to the sector—that is why domestic property developers have turned to foreign investors for funds. From the long-term perspective, China's property market glitters with significant growth potential, and the current gloom provided an entry point for the foreign giants, said Xu Feng, Director of the Shenzhen-based Midland Realty National Research Center.

Meanwhile, concerns have abounded that the foreign capital could soothe the financial distress of developers, and water down China's efforts to let air out of the property bubble.

But Fang Yan, a senior analyst at the Guosen Securities Co. Ltd., dismissed these worries. "The foreign capital is far from enough to meet needs of developers, and is less likely to have a huge impact on the domestic markets," he said.