Golden Heights, an assisted-living community in Beijing, was one of the communities that took the plunge in 2007 and has since reaped the rewards.

"We found that demand for senior-care services was huge but the average amount most customers were willing to pay was less than 1,500 yuan a month. That's why we decided to start from developed regions such as Beijing, Hangzhou, Shanghai and Haikou," said Gao Junsong, general manager of Golden Heights.

The company invested about 580 million yuan ($94.7 million) in a facility in Beijing and another one in Hainan. The facility in Beijing charges more than 10,000 yuan a month and has an occupancy rate of 10 percent after just four months of operation. Most of its residents are retired government employees with welfare benefits and hence have few financial concerns.

As operators focus on high-net-worth individuals, the market for the middle class still remains largely untapped. But that could be exactly where the largest demand will be coming from, analysts said.

"There is no doubt that a lot of Louis Vuitton purses are being sold in China but, at the same time, there is also a growing social need for elderly care services among the middle class," Shobert said.

"That's a much more stable and accessible part of the market. If you look at the success stories of US brands in China, you will find that some of them are luxury products but a lot of them are young brands that figured out a way to really talk to and deliver a solution for the Chinese middle class," he said.

While a viable business model with the middle-income segment of the market is yet to appear, that does not mean it never will.

China Senior Care, a US company, is developing a 64-bed five-star senior community in Hangzhou. It is also considering expanding into the middle-class market by extending its product line.

"With a five-star brand, we want to offer world-class quality of service and care. But, ultimately, we will work on our four-star brand and three-star brand," said Mark Spitalnik, founder, president and chief executive officer of CSC.

"Like the hotel business, we will focus at the top of the chain but, ultimately I think there would be a demand for four- and three-star products as well," he said.

For the moment, though, most of the foreign companies have decided to piggyback on a local partner to tap into the Chinese senior care and housing industry.

Cascade Healthcare, a Seattle-based joint venture between Columbia Pacific Advisors and Emeritus Corp, opened its first healthcare facility in Shanghai in January. The company is setting up another joint venture with Sino-Ocean Land, a Chinese real estate developer, for a new branch in Beijing that is slated to open in July. The investment in the new unit is estimated to be around 40 million yuan.

While Cascade dominates the management process, it said it is in no hurry to go independent.