By ALISON TUDOR
HONG KONG—Kohlberg Kravis Roberts & Co. and Chinese property developer Sino-Ocean Land Holdings Ltd. said they have set up an investment platform that will look for opportunities in China's real-estate market.

Each will contribute $71 million to the platform, which will focus on middle-income residential housing in China's rapidly expanding cities.

The agreement comes as the Chinese government attempts to take some of the air out of the country's property bubble, leaving China's property developers facing a funding crunch, according to analysts and industry executives.

New lending to property developers from traditional banks plunged in the second quarter, to 42 billion yuan ($6.58 billion) from 167.8 billion yuan in the first three months of the year, according to the People's Bank of China.

"Combining Sino-Ocean's strong local expertise in real-estate development and operations with KKR's extensive global resources and investment experience, the joint venture is well positioned to achieve strong performance," said Li Ming, chairman and chief executive of Sino-Ocean. Sino-Ocean has 57 projects across the country at different development stages.