<PAGE>
                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended     December 31, 1999
                              -----------------

Commission file number             0-11962
                              -----------------

                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
-----------------------------------------------------------------------
                 (Name of small business issuer in its charter)

          Maryland                                      52-1311532
-----------------------------------------         ---------------------
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)

11200 Rockville Pike, Rockville, Maryland                 20852
-----------------------------------------         ---------------------
(Address of principal executive offices)                (Zip Code)

Issuer's telephone number      (301) 468-9200
                              -----------------



Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of each exchange
     Title of each class                          on which registered
            NONE                                            N/A
-----------------------------------------         ---------------------

Securities registered pursuant to Section 12(g) of the Act:

                          LIMITED PARTNERSHIP INTERESTS
-----------------------------------------------------------------------
                                (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X]   No [ ]

     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

     State issuer's revenues for its most recent fiscal year $2,283,991.

     The limited partner interests of the Registrant are not traded in any
market.  Therefore, the limited partner interests had neither a market selling
price nor an average bid or asked price within the 60 days prior to the date of
this filing.
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                        1999 ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS


                                                                 Page
                                                                 ----
                                     PART I
                                     ------

Item 1.  Business   . . . . . . . . . . . . . . . . . . . .      I-1
Item 2.  Properties   . . . . . . . . . . . . . . . . . . .      I-7
Item 3.  Legal Proceedings  . . . . . . . . . . . . . . . .      I-7
Item 4.  Submission of Matters to a Vote
           of Security Holders  . . . . . . . . . . . . . .      I-8


                                     PART II
                                     -------

Item 5.  Market for the Registrant's Partnership
           Interests and Related Partnership Matters    . .      II-1
Item 6.  Management's Discussion and Analysis
           of Financial Condition and Results
           of Operations  . . . . . . . . . . . . . . . . .      II-3
Item 7.  Financial Statements   . . . . . . . . . . . . . .      II-10
Item 8.  Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure   . . . .      II-10


                                    PART III
                                    --------

Item 9.  Directors and Executive Officers
           of the Registrant  . . . . . . . . . . . . . . .      III-1
Item 10. Executive Compensation   . . . . . . . . . . . . .      III-2
Item 11. Security Ownership of Certain Beneficial
           Owners and Management  . . . . . . . . . . . . .      III-2
Item 12. Certain Relationships and Related Transactions   .      III-3
Item 13. Exhibits and Reports on Form 8-K   . . . . . . . .      III-4

Signatures  . . . . . . . . . . . . . . . . . . . . . . . .      III-6

Financial Statements  . . . . . . . . . . . . . . . . . . .      III-9
<PAGE>
                                     PART I
                                     ------

ITEM 1.   BUSINESS
          --------

     Capital Realty Investors-III Limited Partnership (the Partnership) is a
limited partnership which was formed under the Maryland Revised Uniform Limited
Partnership Act on June 27, 1983.  On November 7, 1983, the Partnership
commenced offering 60,000 units of limited partnership interests through a
public offering which was managed by Merrill Lynch, Pierce, Fenner and Smith,
Incorporated.  The Partnership closed the offering in January 1984 when it
became fully subscribed.

     The General Partners of the Partnership are C.R.I., Inc. (CRI), which is
the Managing General Partner, and current and former shareholders of CRI.
Services for the Partnership are performed by CRI, as the Partnership has no
employees of its own.

     The Partnership was formed to invest in real estate, which is the
Partnership's principal business activity, by acquiring and holding a limited
partner interest in limited partnerships (Local Partnerships).  The Partnership
originally made investments in 37 Local Partnerships.  As of December 31, 1999,
the Partnership had investments in 31 Local Partnerships.  Each of these Local
Partnerships owns or owned a federal or state government-assisted or
conventionally financed apartment complex, which provides housing principally to
the elderly and/or to individuals and families of low or moderate income.  The
original objectives of these investments, not necessarily in order of
importance, were to:

     (1)  preserve and protect the Partnership's capital;
     (2)  provide, during the early years of the Partnership's operations,
          current tax benefits to the partners in the form of tax losses which
          the partners may use to offset income from other sources;
     (3)  provide capital appreciation through increases in the value of the
          Partnership's investments and increased equity through periodic
          payments on the indebtedness on the apartment complexes; and
     (4)  provide cash distributions from sale or refinancing of the
          Partnership's investments and, on a limited basis, from rental
          operations.

See Part II, Item 6, Management's Discussion and Analysis of Financial Condition
and Results of Operations, for a discussion of factors affecting the original
investment objectives.

     The Local Partnerships in which the Partnership has invested were organized
by private developers who acquired the sites, or options thereon, applied for
applicable mortgage insurance and/or subsidies, and, in general, remain as the
local general partners in the Local Partnerships.  However, in the event of
non-compliance with the Local Partnerships' partnership agreements, the local
general partner may be removed and replaced with another local general partner
or with an affiliate of the Partnership's Managing General Partner.  As a result
of its investment in the Local Partnerships, the Partnership became the
principal limited partner in 31 (27 as of December 31, 1999) of these Local
Partnerships.  As a limited partner, the Partnership's legal liability for
obligations of the Local Partnership is limited to its investment.  In six (four
as of December 31, 1999) Local Partnerships, the Partnership invested as a
limited partner in intermediary partnerships which, in turn, have invested as
general partners in the Local Partnerships.  In most cases, an affiliate of the
Managing General Partner of the Partnership is also a general partner of the 27
Local Partnerships and the four intermediary partnerships.  In most cases, the
local general partners of the Local Partnership retain responsibility for
developing, constructing, maintaining, operating and managing the projects.  The

                                       I-1
<PAGE>
                                     PART I
                                     ------

ITEM 1.   BUSINESS - Continued
          --------

local general partners and affiliates of the Managing General Partner may
operate other apartment complexes which may be in competition for eligible
tenants with the Local Partnerships' apartment complexes.

     Although each of the Local Partnerships in which the Partnership has
invested owns an apartment complex that must compete in the market place for
tenants, interest subsidies and/or rent supplements from governmental agencies
generally make it possible to offer certain of these dwelling units to eligible
tenants at a cost significantly below the market rate for comparable
conventionally financed dwelling units.  Based on available data, the Managing
General Partner believes there to be no material risk of market competition in
the operations of the apartment complexes described below which would adversely
impact the Partnership, except in specific circumstances as described in Part
II, Item 6, Management's Discussion and Analysis of Financial Condition and
Results of Operations.











































                                       I-2
<PAGE>
                                     PART I
                                     ------

ITEM 1.   BUSINESS - Continued
          --------

     A schedule of the apartment complexes owned by Local Partnerships in
which the Partnership has an investment follows.

           SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
            IN WHICH CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                               HAS AN INVESTMENT(1)

<TABLE>
<CAPTION>
                                                                                                   Units          Expiration
                           Mortgage                                                            Authorized for         of
 Name and Location        Payable at          Financed and/or Insured          Number of        Rental Asst.       Section 8
of Apartment Complex     12/31/99 (2)         and/or Subsidized Under         Rental Units      Under Sec. 8      HAP Contract
--------------------     ------------     -------------------------------     ------------     --------------     ------------
<S>                      <C>              <C>                                 <C>              <C>                <C>
Arboretum Village        $ 12,813,116     Conventional                           308                0                  --
 Lisle, IL

Audubon Towers              3,415,475     New Jersey Housing and Mortgage        124              124               02/11/20
 Audubon, NJ                               Finance Agency (NJHMFA)/8-HUD

Bartley Manor                 747,404     Federal Housing Admin. (FHA)/           70               69               05/31/00 (4)
 Superior, WI                              236

Briar Crest I (4)             534,761     FNMA/236                                53               53               06/30/00 (4)
 Niles, MI

Briar Crest II (4)            579,505     FNMA/236                                49               49               06/30/00
 Niles, MI

Briar Hills                   556,176     FNMA/236                                50               33               09/30/00 (4)
 South Haven, MI

College Park                1,155,000     PNC Bank                               100              100               05/01/08
 Meridian, MS

Congress Plaza              2,246,495     Connecticut Housing Finance            101              100               02/28/04
 Bridgeport, CT                            Agency/FHA Sect. 231/HUD

Glen Agnes                  4,144,828     California Housing Finance             149              149               01/27/18
 Fresno, CA                                Agency (CHFA)

Greeley Manor (4)(5)        1,219,251     WMF-Huntoon, Paige Associates          128              119               06/30/00 (4)
 Greeley, CO                               Ltd./236/FHA

Heritage Estates I          2,650,408     Missouri Housing Development           228                0                  --
 St. Louis, MO                             Agency (MHDA)/Section 221(d)(4)
                                           of the National Housing Act (NHA)

Heritage Estates II         2,132,968     MHDA/Section 221 (d)(4) of the         160                0                  --
 St. Louis, MO                             NHA

Highland Manor              1,369,713     Secretary of HUD                       111              111               05/12/00 (4)(6)
 Birmingham, AL

</TABLE>
                                   (Continued)

                                       I-3
<PAGE>
                                     PART I
                                     ------

ITEM 1.   BUSINESS - Continued
          --------

          SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
           IN WHICH CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                        HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                                   Units          Expiration
                           Mortgage                                                            Authorized for         of
 Name and Location        Payable at          Financed and/or Insured          Number of        Rental Asst.       Section 8
of Apartment Complex     12/31/99 (2)         and/or Subsidized Under         Rental Units      Under Sec. 8      HAP Contract
--------------------     ------------     -------------------------------     ------------     --------------     ------------
<S>                      <C>              <C>                                 <C>              <C>                <C>
Indian Hills             $    495,153     FNMA/236 of the NHA/Sect. 8             40               24               09/30/00 (4)
 Townhouses
 Dowagiac, MI

Lakewood Apts.                817,622     Rural Housing & Comm. Dev.              50               50               07/31/00 (4)
 Eufaula, AL                               Services (RHCD)

Meadow Lanes Apts.          1,693,425     Michigan State Housing Develop-        118                0                     --
 Holland, MI                               ment Authority/236 of the NHA

Monterey/Hillcrest         13,440,122     221(d)(4) of the NHA/FHA               300               60               12/13/03
 Waukesha, WI

O'Farrell Towers            7,905,792     CHFA/Section 8                         101              101               09/20/03
 San Francisco, CA

Rolling Green at            8,623,478     Massachusetts Housing Finance          304              132               09/28/10
 Milford (4)                               Agency/236 of the NHA
 Milford, MA

Tyee Apts.                  1,263,273     First National Bank of                 100               40               07/31/00
 Anchorage, AK                             Anchorage/236/FHA                                       16               11/30/03


Victorian Towers            5,000,114     NJHMFA/Section 8                       204               27               12/01/23
 Cape May, NJ

Villa Mirage I              2,096,387     CHFA/Section 8                          50               50               12/01/05
 Rancho Mirage, CA

Villa Mirage II             2,080,706     CHFA/Section 8                          48               48               10/15/05
 Rancho Mirage, CA

Village Green                 329,342     Federal Housing Admin./                 36               36               04/30/00 (4)
 Reedsburg, WI                             236 of FHA

Village Square                444,282     Federal Housing Admin./                 48               48               04/30/00 (4)
 Barabou, WI                               236 of FHA

Village Squire I & II       8,807,543     Conventional                           377                0                  --
 Canton, MI

</TABLE>

                                     (Continued)

                                         I-4
<PAGE>
                                     PART I
                                     ------

ITEM 1.   BUSINESS - Continued
          --------

          SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
           IN WHICH CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                        HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                                   Units          Expiration
                           Mortgage                                                            Authorized for         of
 Name and Location        Payable at          Financed and/or Insured          Number of        Rental Asst.       Section 8
of Apartment Complex     12/31/99 (2)         and/or Subsidized Under         Rental Units      Under Sec. 8      HAP Contract
--------------------     ------------     -------------------------------     ------------     --------------     ------------
<S>                      <C>              <C>                                 <C>              <C>                <C>
Village Squire III       $  5,682,534     Conventional                           224                0                  --
 Canton, MI

Walsh Park                  4,841,244     IHDA                                   134              134               11/01/14
 Chicago, IL

Winchester Gardens          2,925,333     HUD                                    206              202               10/05/00 (4)
 Apts.
 Columbus, OH

Windham Village             2,391,138     CHFA                                    50               44               10/31/15
 Santa Rose, CA

Woodside Village            2,401,666     FNMA/236                               180              114               08/31/00 (4)
 Anchorage, AK
                         ------------                                         ------           ------
Totals 31                $104,804,254                                          4,201            2,033
                         ============                                         ======           ======

</TABLE>


























                                       I-5
<PAGE>

            SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
             IN WHICH CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                         HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                   Average Effective Annual
                                      Units Occupied As                                 Rental Per Unit
                                  Percentage of Total Units                           for the Year Ended
                                      As of December 31,                                  December 31,
 Name and Location            ---------------------------------      -----------------------------------------------------
of Apartment Complex          1999    1998   1997   1996   1995        1999       1998       1997       1996        1995
--------------------          ----    ----   ----   ----   ----      --------   --------   --------   --------    --------
<S>                           <C>     <C>    <C>    <C>    <C>       <C>        <C>        <C>        <C>         <C>
Arboretum Village              93%     95%    94%    92%    94%      $  9,338   $  9,238   $  8,724   $  8,677    $  8,363
 Lisle, IL

Audubon Towers                100%    100%   100%   100%    100%        9,158      9,161      9,166      9,164       9,129
 Audubon, NJ

Bartley Manor                  93%     93%    93%    98%    90%         5,656      5,356      5,313      5,116       5,024
 Superior, WI

Briar Crest I                  96%     97%   100%    98%    98%         5,333      4,784      5,012      4,844       4,611
 Niles, MI

Briar Crest II                 94%     96%   100%   100%   100%         5,327      4,814      4,986      4,950       4,579
 Niles, MI

Briar Hills                    92%     94%    96%    94%    96%         4,465      4,461      4,430      4,446       4,105
 South Haven, MI

College Park                   99%    100%   100%   100%   100%         4,937      4,955      4,944      4,927       4,856
 Meridian, MS

Congress Plaza                100%    100%   100%   100%   100%        10,534     10,535     10,511     10,524      10,507
 Bridgeport, CT

Glen Agnes                     98%     95%    95%    94%    94%         7,836      7,634      7,623      7,654       7,742
 Fresno, CA

Greeley Manor (5)              95%    100%    98%    97%    97%         3,629      3,573      3,159      3,087       2,928
 Greeley, CO

Heritage Estates I            100%     99%   100%    98%    98%         5,176      4,940      4,776      4,722       4,629
 St. Louis, MO

Heritage Estates II           100%    100%   100%    94%    98%         5,193      4,968      4,764      4,663       4,605
 St. Louis, MO

Highland Manor                100%     98%    97%   100%    99%         6,515      7,584      9,188      9,011       8,739
 Birmingham, AL

Indian Hills                  100%    100%   100%    95%    98%         5,272      5,070      5,002      4,847       4,653
 Townhouses
 Dowagiac, MI

Lakewood Apts.                100%     98%    98%   100%   100%         4,305      4,269      4,363      4,264       4,200
 Eufaula, AL

</TABLE>
                                   (Continued)

                                       I-6
<PAGE>

         SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
          IN WHICH CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                         HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                   Average Effective Annual
                                      Units Occupied As                                 Rental Per Unit
                                  Percentage of Total Units                           for the Year Ended
                                      As of December 31,                                  December 31,
 Name and Location            ---------------------------------      -----------------------------------------------------
of Apartment Complex          1999    1998   1997   1996   1995        1999       1998       1997       1996        1995
--------------------          ----    ----   ----   ----   ----      --------   --------   --------   --------    --------
<S>                           <C>     <C>    <C>    <C>    <C>       <C>        <C>        <C>        <C>         <C>
Meadow Lanes Apts.             97%     98%    93%    96%    98%      $  6,216   $  6,174   $  6,056   $  5,985    $  5,694
 Holland, MI

Monterey/Hillcrest             96%     92%    94%    90%    94%         8,559      8,992      8,745      8,742       8,413
 Waukesha, WI

O'Farrell Towers              100%    100%   100%   100%    99%        14,420     14,371     14,079     14,316      14,391
 San Francisco, CA

Rolling Green at               97%     97%    99%    97%    98%         9,717      8,247      8,012      7,663       7,457
 Milford
 Milford, MA

Tyee Apts.                     98%    100%    84%    94%    98%         8,947      8,707      8,676      8,565       8,311
 Anchorage, AK

Victorian Towers               96%     99%    97%   100%   100%         5,196      4,989      4,902      4,783       4,588
 Cape May, NJ

Villa Mirage I                100%    100%   100%    98%   100%         9,522      9,699      9,671      9,660       9,560
 Rancho Mirage, CA

Villa Mirage II               100%    100%   100%    98%   100%         9,580      9,580      9,600      9,702       9,673
 Rancho Mirage, CA

Village Green                  92%     97%    89%    98%    94%         3,849      3,886      3,764      3,744       3,761
 Reedsburg, WI

Village Square                 83%     94%    98%    95%    94%         4,362      4,243      4,275      4,023       3,988
 Barabou, WI

Village Squire I               97%     90%    92%    91%    98%         6,152      5,902      5,858      5,898       5,682
 & II
 Canton, MI

Village Squire III             97%     93%    96%    94%    96%         6,199      5,820      5,779      5,813       5,567
 Canton, MI

Walsh Park                     96%     99%    98%    99%   100%         8,940     11,653     11,301     11,083      10,777
 Chicago, IL

Winchester Gardens             93%     90%    99%   100%    98%         4,001      4,136      4,452      4,447       4,405
 Apts.
 Columbus, OH

</TABLE>
                                   (Continued)


                                       I-7
<PAGE>

          SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
           IN WHICH CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                        HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                   Average Effective Annual
                                      Units Occupied As                                 Rental Per Unit
                                  Percentage of Total Units                           for the Year Ended
                                      As of December 31,                                  December 31,
 Name and Location            ---------------------------------      -----------------------------------------------------
of Apartment Complex          1999    1998   1997   1996   1995        1999       1998       1997       1996        1995
--------------------          ----    ----   ----   ----   ----      --------   --------   --------   --------    --------
<S>                           <C>     <C>    <C>    <C>    <C>       <C>        <C>        <C>        <C>         <C>
Windham Village               100%    100%   100%   100%   100%      $ 10,572   $ 10,474   $ 10,438   $ 10,439    $ 10,396
 Santa Rose, CA

Woodside Village               91%     86%    84%    84%    90%         9,295      8,420      8,576      8,927       9,145
 Anchorage, AK
----------------              ----    ----   ----   ----   ----      --------   --------   --------   --------    --------
Totals(3)  31                  97%     97%    97%    97%    97%      $  7,039   $  6,988   $  6,972   $  6,925    $  6,790
                              ====    ====   ====   ====   ====      ========   ========   ========   ========    ========

</TABLE>

(1)  All properties are multifamily housing complexes.  No single
     tenant/resident rents 10% or more of the rentable square footage.
     Residential leases are typically one year or less in length, with varying
     expiration dates, and substantially all rentable space is for residential
     purposes.

(2)  The amounts provided are the balances of first mortgage loans payable of
     the Local Partnerships as of December 31, 1999.

(3)  The totals for the percentage of units occupied and the average effective
     annual rental per unit are based on a simple average.

(4)  The Section 8 contract expiration date reflects an extension from the
     original expiration date, in accordance with Federal legislation.

(5)  In January 2000, the Partnership's interest in Greeley Manor was
     transferred to the purchase money noteholder.

(6)  This property entered the Mark-to-Market program in May 1998.  The Section
     8 HAP contract will be renewed annually.

     On June 30, 1998, the Partnership sold its interest in Southmoor.  See the
notes to the consolidated financial statements for additional information
concerning the sale.

     In January 2000, the Partnership's interest in Greeley Manor was
transferred to the noteholder.  See the notes to the consolidated financial
statements for additional information concerning the transfer.

     The local managing general partner of O'Farrell has executed a contract for
the sale of the property, with a projected closing date of May 2000.  See the
notes to the consolidated financial statements for additional information
concerning the sale.





                                       I-8
<PAGE>
                                     PART I
                                     ------

ITEM 1.   BUSINESS - Continued
          --------

     In January 2000, the Partnership received notification from the local
managing general partner of a potential sale of the Rolling Green at Milford
property.  See the notes to the consolidated financial statements for additional
information concerning the potential sale.

     The Partnership has agreed to transfer its interests in College Park in
full satisfaction of its purchase money note indebtedness.  See the notes to the
consolidated financial statements for additional information concerning the
transfer.

     Subject to regulatory approval, the Partnership intends to transfer its
interests in Glen Agnes for $25,000 and the assumption of the purchase money
note.  See the notes to the consolidated financial statements for additional
information concerning the transfer.


ITEM 2.   PROPERTIES
          ----------

     Through its ownership of limited partner interests in Local Partnerships,
Capital Realty Investors-III Limited Partnership indirectly holds an interest in
the underlying real estate.  See Part I, Item 1 for information concerning these
properties.


ITEM 3.   LEGAL PROCEEDINGS
          -----------------

     In March 1999, the Partnership received notice of a collection action on
purchase money notes related to College Park.  See the notes to the consolidated
financial statements for additional information concerning the purchase money
notes.

     In November 1999, the holder of the purchase money note related to Glen
Agnes filed an action to foreclose on the Partnership's interest in the Local
Partnership.  See the notes to the consolidated financial statements for
additional information concerning the purchase money note.

     The Partnership's affiliate, C.R.H.C., Incorporated (CRHC), removed the
Local Managing General Partner (LMGP) of both Villa Mirage I and Villa Mirage II
in December 1999, due to its failure to address problems identified in the 1998
audited financial statements of those lower tier partnerships, including
overpayments to itself and its affiliated property management company.  The
removed LMGP and its shareholder and another unrelated Local General Partner
filed lawsuits against the Partnership and CRHC with respect to both Villa
Mirage I and II seeking, among other things, an accounting and dissolution of
the partnerships and damages for alleged breaches of the respective partnership
agreements.  Subsequently, the same plaintiffs filed injunction actions seeking
to compel the sales of the properties owned by Villa Mirage I and II.  The
Partnership is defending both actions vigorously.  See the notes to the
consolidated financial statements for additional information concerning these
proceedings.






                                       I-9
<PAGE>
                                     PART I
                                     ------

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
























































                                      I-10
<PAGE>
                                     PART II
                                     -------

ITEM 5.   MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND
          -----------------------------------------------------
               RELATED PARTNERSHIP MATTERS
               ---------------------------

     (a)  On November 1, 1999, Odd Lot Liquidity Fund, LLC (Odd Lot), an
          affiliate of an additional limited partner of the Partnership,
          initiated an unregistered tender offer to purchase no more than 4.9%
          of the outstanding units of additional limited partnership interest
          (Units) of CRI-III at a price of $30 per Unit.  Odd Lot, which is
          unaffiliated with the Partnership, stated that it made the offer for
          the express purpose of holding the Units for investment purposes and
          not with a view to resale.  The price offered was determined solely at
          the discretion of Odd Lot and did not necessarily represent the fair
          market value of each Unit.  The Odd Lot offer expired on December 3,
          1999, and as of March 28, 2000, the entity to which Odd Lot assigned
          its newly acquired Units held 1.3% of the Units in the Partnership.
          Other than any other tender offers, it is not anticipated that there
          will be any formal market for resale of Units.  As a result, investors
          may be unable to sell or otherwise dispose of their Units in the
          Partnership.

          During 1999, a number of investors sold their Units in the Partnership
          to other investors, as a result of an unregistered tender offer made
          in December 1998.  If more than 5% of the total outstanding Units in
          the Partnership are transferred in any one calendar year (not counting
          certain exempt transfers), the Partnership could be taxed as a
          "publicly traded partnership," with potentially severe tax
          implications for the Partnership and its investors.  Specifically, the
          Partnership would be taxed as a corporation and the income and losses
          from the Partnership would no longer be considered a passive activity.
          From January 1, 1999 through June 1, 1999, approximately 4.9% of
          outstanding Units were sold.  Accordingly, to remain within the 5%
          safe harbor, effective June 1, 1999, the General Partner of the
          Partnership halted recognition of any transfers that would exceed the
          safe harbor limit through December 31, 1999.  As a result, transfers
          of Units due to sales transactions were not recognized by the
          Partnership between June 1 and December 31, 1999.

     (b)  As of March 28, 2000 there were approximately 5,100 registered holders
          of additional limited partnership interests in the Partnership.

     (c)  On November 12, 1999, the Partnership made a cash distribution of
          $599,070 ($10.00 per additional limited partnership interest) to the
          Additional Limited Partners out of available cash flow.

          On November 23, 1998, the Partnership made a cash distribution of
          $599,650 ($10.00 per additional limited partnership interest) to the
          Additional Limited Partners.  The distribution was a result of the
          sale of the property relating to the Partnership's investment in
          Southmoor and the refinancing of the Arboretum Village first mortgage
          loan.

          The Partnership received distributions of $1,069,289 and $6,214,806
          from the Local Partnerships during 1999 and 1998, respectively.  Some
          of the Local Partnerships operate under restrictions imposed by
          certain federal and/or state government agencies that limit the cash
          return available to the Partnership.



                                      II-1
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS
               -----------------------------------

     Capital Realty Investors-III Limited Partnership's (the Partnership)
Management's Discussion and Analysis of Financial Condition and Results of
Operations section contains information that may be considered forward looking,
including statements regarding the effect of governmental regulations.  Actual
results may differ materially from those described in the forward looking
statements and will be affected by a variety of factors including national and
local economic conditions, the general level of interest rates, terms of
governmental regulations that affect the Partnership and interpretations of
those regulations, the competitive environment in which the Partnership
operates, and the availability of working capital.

                                     General
                                     -------

     The Partnership has invested, through Local Partnerships, primarily in
federal or state government-assisted apartment complexes (the properties)
intended to provide housing to low and moderate income tenants.  In conjunction
with such governmental assistance, which includes federal and/or state financing
at below-market interest rates and rental subsidies, the Local Partnerships
agreed to regulatory limitations on (i) cash distributions, (ii) use of the
properties and (iii) sale or refinancing.  These limitations typically were
designed to remain in place for the life of the mortgage.

     The original investment objectives of the Partnership primarily were to
deliver tax benefits, as well as cash proceeds upon disposition of the
properties, through the Partnership's investment in local limited partnerships.
Only limited annual cash distributions from property operations were projected
because of the regulatory restrictions on cash distributions from the
properties.

     The original investment objectives of the Partnership have been affected by
the Tax Reform Act of 1986, which virtually eliminated many of the incentives
for the new construction or the sale of existing low income housing properties
by limiting the use of passive loss deductions.  Therefore, the Managing General
Partner continues to concentrate on transferring the source of investment yield
from tax benefits to cash flow wherever possible, and on potentially enhancing
the ability of the Partnership to share in the appreciated value of the
properties.

     The acquisition of interests in certain Local Partnerships was paid for in
part by purchase money notes of the Partnership.  The purchase money notes are
nonrecourse obligations of the Partnership which typically mature 15 years from
the date of acquisition of the interest in a particular Local Partnership, and
are generally secured by the Partnership's interests in the Local Partnerships.

     C.R.I., Inc. (the Managing General Partner) has been working to develop a
strategy to sell certain properties by utilizing opportunities presented by
federal affordable housing legislation, favorable financing terms and
preservation incentives available to not-for-profit purchasers.  The Managing
General Partner intends to utilize all or part of the Partnership's net proceeds
(after a partial distribution to limited partners) received from the sales of
properties to fund reserves for paying at maturity, prepaying or purchasing
prior to maturity, at a discount where possible, currently outstanding purchase
money notes.  The Managing General Partner believes that this represents an
opportunity to reduce the Partnership's long-term obligations.

                                      II-2
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

     Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies.  The Managing General Partner has been working to
develop strategies to sell or refinance certain properties pursuant to programs
developed by these agencies.  These programs may include opportunities to sell a
property to a qualifying purchaser who would agree to maintain the property as
low to moderate income housing in perpetuity, or to refinance a property, or to
obtain supplemental financing.  The Managing General Partner continues to
monitor certain state housing agency programs, and/or programs provided by
certain lenders, to ascertain whether the properties would qualify within the
parameters of a given program and whether these programs would provide an
appropriate economic benefit to the limited partners of the Partnership.

     Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of project-based Section 8 Rental Housing Assistance Payments
(HAP) provided by the U.S. Department of Housing and Urban Development (HUD)
pursuant to Section 8 HAP contracts.  Current legislation allows all expired
Section 8 HAP contracts with rents at less than 100% of fair market rents to be
renewed for one year.  Expiring Section 8 HAP contracts with rents that exceed
100% of fair market rents could be renewed for one year, but at rents reduced to
100% of fair market rents (Mark-to-Market).  All expiring Section 8 HAP
contracts with rents exceeding comparable market rents, and properties with
mortgage loans insured by the Federal Housing Administration (FHA), became
subject to the Mark-to-Market legislation.

     Mark-to-Market implementation will reduce rental income at properties which
are currently subsidized at higher-than-market rental rates, and will therefore
lower cash flow available to meet mortgage payments and operating expenses.
Each affected property may undergo debt restructuring according to terms
determined by an individual property and operations evaluation.  This may
involve reducing the first mortgage loan balance to an amount supportable by the
property, taking into account the property's operating expenses and reduced
income.  The balance of the amount written down from the first mortgage loan
will be converted to a non-performing but accruing (soft) second mortgage loan.

     In many instances, the Mark-to-Market rental rate restructuring may require
the write down of an FHA-insured mortgage loan, which would trigger cancellation
of indebtedness income to the partners, a taxable event, even though no actual
cash is received.  Additionally, if the existing first mortgage loan is
bifurcated into a first and second mortgage loan, the newly created second
mortgage loan will accrue interest at a below-market rate; however, the Internal
Revenue Service issued a ruling in July 1998 that concluded that the below-
market rate of interest will not generate additional ordinary income.  Each
property subject to Mark-to-Market will be affected in a different manner, and
it is very difficult to predict the exact form of restructuring, or potential
tax liabilities to the limited partners, at this time.

     There is a new HUD-sponsored program generally referred to as "Mark-up-to-
Market."  Under this program, properties with expiring Section 8 contracts that
are located in high-rent areas as defined by HUD are eligible for rent increases
which would be necessary to bring Section 8 rents in line with market rate
rents.  For properties with subsidized FHA loans, the rents are adjusted to take
into account the benefits the property is already receiving from the below-




                                      II-3
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

market interest rate by means of a HUD determined Interest Subsidy Adjustment
Factor.  The purpose of this program is to incentivize owners of properties with
expiring Section 8 contracts not to convert these properties to market rate
housing.

     In return for receiving market rate rents under Mark-up-to-Market, the
property owner must enter into a five year conditional Section 8 contract with
HUD, subject to the annual availability of funding by Congress.  In addition,
property owners who enter into the Mark-up-to-Market program will receive a
waiver from the cash flow restriction imposed on the property by the limited
dividend limitation.

     The Managing General Partner is considering new strategies to deal with the
ever changing environment of affordable housing policy.  The Section 236 and
Section 221(d)(3) mortgage loans may be eligible for pre-payment in their 18th
year or later.  Properties with expiring Section 8 HAP contracts may become
convertible to market-rate apartment properties.  Currently, there are few
lenders that will provide financing either to prepay existing mortgage loans of
these types or provide additional funds to allow a property to convert to
market-rate units.  Where opportunities exist, the Managing General Partner will
continue to work with the Local Partnerships to develop strategies that make
economic sense for all parties involved.

                          Financial Condition/Liquidity
                          -----------------------------

     As of December 31, 1999 the Partnership had approximately 5,100 investors
who subscribed to a total of 60,000 units of limited partnership interests in
the original amount of $60,000,000.  The Partnership originally made investments
in 37 Local Partnerships, of which 31 remain at December 31, 1999.  The
Partnership's liquidity, with unrestricted cash resources of $10,045,683 as of
December 31, 1999, along with anticipated future cash distributions from the
Local Partnerships, is expected to be adequate to meet its current and
anticipated operating cash needs.  During 1999 and 1998, the Partnership
received cash distributions of $1,069,289 and $6,214,806, respectively, from the
Local Partnerships.  As of March 28, 2000, there are no material commitments for
capital expenditures.

     The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$21,994,384 (exclusive of unamortized discount on purchase money notes of
$573,464) plus accrued interest of $49,515,184 as of December 31, 1999, are
payable in full upon the earliest of:  (1) sale or refinancing of the respective
Local Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity.  Purchase money notes in the
aggregate principal amount of $1,700,000, which originally matured on December
31, 1997, have been extended until January 31, 2001.  Purchase money notes in
the aggregate principal amount of $364,481 matured January 1, 1999 and were paid
off, at a discount, on February 5, 1999.  Purchase money notes in the original
aggregate principal amount of $1,760,000 matured on January 1, 1999 and were
extended to January 1, 2004.  Purchase money notes in the aggregate principal
amount of $900,000 matured on January 1, 1999 and the parties are in the process
of negotiating an extension of these notes until January 1, 2004.  Purchase
money notes in the aggregate principal amounts of $5,280,000 and $5,290,000
matured in January and February, 1999, respectively, and were not paid or

                                      II-4
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

extended.  Purchase money notes in the original aggregate principal amount of
$775,000 matured on January 1, 1999, were partially paid, and have been extended
to January 1, 2002.  Purchase money notes in the original aggregate principal
amount of $1,275,000 matured on January 1, 1999, and have been extended to June
30, 2000.  Purchase money notes in the aggregate principal amount of $734,500
matured on August 1, 1999, and had been extended until January 3, 2000, at which
time the Partnership's interest in the related Local Partnership was transferred
to the noteholders in exchange for the cancellation of all principal and accrued
interest due under the notes.   Purchase money notes in the aggregate principal
amount of $850,000 matured on June 30, 1999 and have not been paid or extended.
Purchase money notes in the aggregate principal amount of $1,365,000 matured on
October 1, 1999 and were paid off at a discount in January 2000.  The remaining
purchase money notes mature during 2002 through 2015.  See the notes to the
consolidated financial statements for additional information concerning these
purchase money notes.

     The purchase money notes, which are nonrecourse to the Partnership, are
generally secured by the Partnership's interest in the respective Local
Partnerships.  There is no assurance that the underlying properties will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes' principal and accrued interest when due.  If a purchase money note
is not paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest in
the Local Partnership.  The Partnership's inability to pay certain of the
purchase money note principal and accrued interest balances when due, and the
resulting uncertainty regarding the Partnership's continued ownership interest
in the related Local Partnerships, does not adversely impact the Partnership's
financial condition because the purchase money notes are nonrecourse and secured
solely by the Partnership's interest in the related Local Partnerships.
Therefore, should the investment in any of the Local Partnerships with maturing
purchase money notes not produce sufficient value to satisfy the related
purchase money notes, the Partnership's exposure to loss is limited because the
amount of the nonrecourse indebtedness of each of the maturing purchase money
notes exceeds the carrying amount of the investment in, and advances to, each of
the related Local Partnerships.  Thus, even a complete loss of the Partnership's
interest in one of these Local Partnerships would not have a material adverse
impact on the financial condition of the Partnership.  See further discussions
of certain purchase money notes in the notes to the consolidated financial
statements.

     The following chart presents information related to purchase money notes
which have matured, have been extended to mature, or are scheduled to mature
through December 31, 2000, and which remain unpaid or unextended as of March 28,
2000.  Excluded from the following chart are purchase money notes which matured
through December 31, 1999, and which have been paid off, cancelled, or extended
on or before March 28, 2000.










                                      II-5
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

<TABLE>
<CAPTION>

                                                                                                    Carrying Amount
                                                                        Aggregate                   of Partnership's
                                              Aggregate                 Accrued                      Investment in
                                              Principal                 Interest                    and Advances to
                   Number of                   Balance                  Balance                     Underlying Local
    Purchase       Underlying                   as of                    as of                      Partnerships as
   Money Note        Local      Percentage     December    Percentage   December       Percentage    of December        Percentage
 (PMN) Maturity   Partnerships   of Total      31, 1999     of Total    31, 1999        of Total       31, 1999          of Total
----------------  ------------  ----------   -----------   ----------   -----------    ----------   ----------------    ----------
<S>               <C>           <C>          <C>           <C>          <C>            <C>          <C>                 <C>
1st Quarter 1999        6            19%     $10,590,000         48%    $22,110,410         45%       $  6,464,402           33%
2nd Quarter 1999        1             3%         850,000          4%      1,665,072          3%          1,375,042            7%
2nd Quarter 2000        1             3%       1,275,000          6%      3,513,449          7%          4,828,924           24%
                     ----         -----      -----------      -----     -----------      -----        ------------        -----
Total through
 12/31/2000             8            25%     $12,715,000         58%    $27,288,931         55%       $ 12,668,368           64%
                     ====         =====      ===========      =====     ===========      =====        ============        =====

Total, Local
  Partnerships         31           100%     $21,994,384        100%    $49,515,184        100%       $ 19,683,671          100%
                     ====         =====      ===========      =====     ===========      =====        ============        =====

</TABLE>

     The Managing General Partner is continuing to investigate possible
alternatives to reduce the Partnership's debt obligations.  These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, paying off certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes,
refinancing the respective properties' underlying debt or selling the underlying
real estate and using the Partnership's share of the proceeds to pay or buy down
certain purchase money note obligations.  Although the Managing General Partner
has had some success applying these strategies in the past, the Managing General
Partner cannot assure that these strategies will be successful.  Based on
discussions with the holders of purchase money notes maturing through December
31, 2000, the Managing General Partner can state that, in certain instances, the
noteholders do not appear to be willing to negotiate any extension or discounted
payoff.  In such instances, upon maturity of the purchase money notes, the
noteholders may have the right to foreclose on the Partnership's interest in the
related Local Partnerships.  In the event of a foreclosure, the excess of the
nonrecourse indebtedness over the carrying amount of the Partnership's
investment in the related Local Partnership would be deemed cancellation of
indebtedness income, which would be taxable to Limited Partners at a federal tax
rate of up to 39.6%.  Additionally, in the event of a foreclosure, the
Partnership would lose its investment in the Local Partnership and, likewise,
its share of any future cash flow distributed by the Local Partnership from
rental operations, mortgage debt refinancings, or the sale of the real estate.
Of the 31 Local Partnerships in which the Partnership is invested as of both
December 31, 1999 and December 31, 1998, the eight Local Partnerships with
associated purchase money notes which mature through December 31, 2000 and which



                                      II-6
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

remain unpaid or unextended as of March 28, 2000, represent the following
percentages of the Partnership's total distributions received from Local
Partnerships and share of income from Local Partnerships.

<TABLE>
<CAPTION>

                          Percentage of Total      Partnership's Share of
       For the Years     Distributions Received         Income from
           Ending        from Local Partnerships     Local Partnerships
     -----------------   -----------------------   ----------------------
     <S>                 <C>                       <C>
     December 31, 1999             20%                  $1,138,683
     December 31, 1998              6%                  $1,203,021

</TABLE>

     The Managing General Partner continues to address the maturity and
impending maturity of its debt obligations and seeks strategies which will
provide the most favorable outcome to the Additional Limited Partners.  However,
there can be no assurance that these strategies will be successful.

     The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
In 1999 and 1998, the receipt of distributions from Local Partnerships was
adequate to support operating cash requirements.  Cash and cash equivalents
decreased during 1999 primarily due to cash used for the discounted payoff of a
purchase money note, and for the partial paydown of two purchase money notes, as
discussed in the notes to the consolidated financial statements.

     The Partnership made a cash distribution of $599,070 ($10.00 per additional
limited partnership interest) to the Additional Limited Partners from cash
resources accumulated from operations and distributions from partnerships on
November 12, 1999, to holders of record as of October 1, 1999.  The Managing
General Partner intends to reserve all of the Partnership's remaining
undistributed cash for the possible repayment, prepayment or retirement of the
Partnership's outstanding purchase money notes related to the Local
Partnerships.

                              Results of Operations
                              ---------------------

1999 Versus 1998
----------------

     The Partnership's net loss for the year ended December 31, 1999 increased
from the year ended December 31, 1998 primarily due to a decrease in share of
income from partnerships related to receipt of proceeds from the refinancings of
the loans secured by first mortgages on Arboretum Village and Rolling Green-
Milford in April 1998 and July 1998, respectively.  Contributing to the loss
were an extension fee related to one of the purchase money notes, an increase in
general and administrative expenses due to higher reimbursed payroll costs, and
a decrease in interest income due to decreased cash and cash equivalent
balances.  Off-setting the Partnership's net loss were a decrease in interest
expense due to less amortization of discount on purchase money notes during 1999

                                      II-7
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

and an extraordinary gain from extinguishment of debt as a result of the
discounted payoff of the purchase money note related to Lakewood Apartments in
February 1999.

     For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships.  As
a result, the Partnership's share of income from Local Partnerships for the
years ended December 31, 1999 and 1998 did not include losses of $958,378 and
$1,134,644, respectively.  The Partnership's net loss recognized from the Local
Partnerships is generally expected to decrease in subsequent years as the
Partnership's investments in the Local Partnerships are reduced to zero.
Accordingly, excludable losses are generally expected to increase.
Distributions of $324,528 and $5,269,903 received from eight and ten Local
Partnerships during 1999 and 1998, respectively, were offset against the
respective years' recorded losses because these amounts were in excess of the
Partnership's investment.

                                    Inflation
                                    ---------

     Inflation allows for increases in rental rates, usually offsetting any
higher operating and replacement costs.  Furthermore, inflation generally does
not impact the fixed rate long-term financing under which the Partnership's real
property investments were purchased.  Future inflation could allow for
appreciated values of the Local Partnerships' properties over an extended period
of time as rental revenue and replacement values gradually increase.

     The following table reflects the combined rental revenues of the properties
for the five years ended December 31, 1999.  Combined rental revenue amounts for
years prior to 1999 have been adjusted to exclude rental revenues from those
properties in which the Partnership no longer is invested at December 31, 1999.























                                      II-8
<PAGE>
                                     PART II
                                     -------

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

<TABLE>
<CAPTION>

                                                         For the year ended December 31,
                    -----------------------------------------------------------------------------------------------------
                       1999                  1998                    1997                  1996                  1995
                    -----------           -----------             -----------           -----------           -----------
<S>                 <C>            <C>    <C>            <C>      <C>           <C>     <C>           <C>     <C><C>
Combined Rental
  Revenue           $30,406,116           $29,945,255             $29,650,481           $29,483,376           $28,830,656

Annual Percentage
  Increase                         1.5%                  1.0%                   0.6%                  2.3%

</TABLE>

                            Year 2000 Computer Issue
                            ------------------------

     The Partnership experienced little to no interruption in its computer
operations, or otherwise, as a result of the transition from the year 1999 to
2000.  The Partnership's expenses associated with upgrading and testing its
internal hardware and software systems, data interfaces, business operations and
non-information technology functions which could have been affected by the
transition were not material.


ITEM 7.   FINANCIAL STATEMENTS
          --------------------

     The information required by this item is contained in Part III.


ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ------------------------------------------------
               ACCOUNTING AND FINANCIAL DISCLOSURE
               -----------------------------------

     None.

















                                      II-9
<PAGE>
                                    PART III
                                    --------

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          --------------------------------------------------

     (a), (b) and (c)

          The Partnership has no directors, executive officers or significant
          employees of its own.

     (a), (b), (c) and (e)

          The names, ages and business experience of the directors and executive
          officers of C.R.I., Inc. (CRI), the Managing General Partner of the
          Partnership, are as follows:

William B. Dockser, 63, has been the Chairman of the Board of CRI and a Director
since 1974.  Prior to forming CRI, he served as President of Kaufman and Broad
Asset Management, Inc., an affiliate of Kaufman and Broad, Inc., which managed a
number of publicly held limited partnerships created to invest in low and
moderate income multifamily apartment properties.  For a period of 2-1/2 years
prior to joining Kaufman and Broad, he served in various positions at HUD,
culminating in the post of Deputy FHA Commissioner and Deputy Assistant
Secretary for Housing Production and Mortgage Credit, where he was responsible
for all federally insured housing production programs.  Before coming to
Washington, Mr. Dockser was a practicing attorney in Boston and also was a
special Assistant Attorney General for the Commonwealth of Massachusetts.  He
holds a Bachelor of Laws degree from Yale University Law School and a Bachelor
of Arts degree, cum laude, from Harvard University.  He is also Chairman of the
Board and a Director of CRIIMI MAE Inc. and CRIIMI, Inc.

H. William Willoughby, 53, has been President, Secretary and a Director of CRI
since January 1990 and was Senior Executive Vice President, Secretary and a
Director of CRI from 1974 to 1989.  He is principally responsible for the
financial management of CRI and its associated partnerships.  Prior to joining
CRI in 1974, he was Vice President of Shelter Corporation of America and a
number of its subsidiaries dealing principally with real estate development and
equity financing.  Before joining Shelter Corporation, he was a senior tax
accountant with Arthur Andersen & Co.  He holds a Juris Doctor degree, a Master
of Business Administration degree and a Bachelor of Science degree in Business
Administration from the University of South Dakota.  He is also a Director and
executive officer of CRIIMI MAE Inc. and CRIIMI, Inc.

Susan R. Campbell, 41, is Executive Vice President and Chief Operating Officer.
Prior to joining CRI in March 1985, she was a budget analyst for the B. F. Saul
Advisory Company.  She holds a Bachelor of Science degree in General Business
from the University of Maryland.

Melissa Cecil Lackey, 44, is Senior Vice President and General Counsel.  Prior
to joining CRI in 1990, she was associated with the firms of Zuckerman, Spaeder,
Goldstein, Taylor & Kolker in Washington, D.C. and Hirsch & Westheimer in
Houston, Texas.  She holds a Juris Doctor degree from the University of Virginia
School of Law and a Bachelor of Arts degree from the College of William & Mary.










                                      III-1
<PAGE>
                                    PART III
                                    --------

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
          --------------------------------------------------

     (d)  There is no family relationship between any of the foregoing directors
          and executive officers.

     (f)  Involvement in certain legal proceedings.

          None.

     (g)  Promoters and control persons.

          Not applicable.


ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------

     (a), (b), (c), (d), (e), (f), (g), (i), (j), (k) and (l)

          The Partnership has no officers or directors.  However, in accordance
          with the Partnership Agreement, and as disclosed in the public
          offering, various kinds of compensation and fees were paid or are
          payable to the General Partners and their affiliates.  Additional
          information required in these sections is incorporated herein by
          reference to Notes 3 and 4 of the notes to the consolidated financial
          statements contained in Part III.

     (h)  Termination of employment and change in control arrangements.

          None.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          ---------------------------------------------------
               MANAGEMENT
               ----------

     (a)  Security ownership of certain beneficial owners.

          The following table sets forth certain information concerning any
          person (including any "group") who is known to the Partnership to be
          the beneficial owner of more than five percent of the issued and
          outstanding units of additional limited partnership interest (Units)
          at March 28, 2000.

              Name of                 Amount and Nature        % of total
          Beneficial Owner         of Beneficial Ownership    Units issued
          ----------------         -----------------------    -----------
          Equity Resources Group,         4,737 units             7.9%
            Incorporated, et. al.
            14 Story Street
            Cambridge, MA 02138

     (b)  Security ownership of management.

          The following table sets forth certain information concerning all
          Units beneficially owned, as of March 28, 2000, by each director and
          by all directors and officers as a group of the Managing General
          Partner of the Partnership.

                                      III-2
<PAGE>
                                    PART III
                                    --------

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          ---------------------------------------------------
               MANAGEMENT - Continued
               ----------

              Name of                 Amount and Nature        % of total
          Beneficial Owner         of Beneficial Ownership    Units issued
          ----------------         -----------------------    -----------
          William B. Dockser                 None                   0%
          H. William Willoughby              None                   0%
          All Directors and Officers
            as a Group (4 persons)           None                   0%

     (c)  Changes in control.

          There exists no arrangement known to the Partnership, the operation of
          which may, at a subsequent date, result in a change in control of the
          Partnership.  There is a provision in the Limited Partnership
          Agreement which allows, under certain circumstances, the ability to
          change control.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

     (a)  Transactions with management and others.

          The Partnership has no directors or officers. In addition, the
          Partnership has had no transactions with individual officers or
          directors of the Managing General Partner of the Partnership other
          than any indirect interest such officers and directors may have in the
          amounts paid to the Managing General Partner or its affiliates by
          virtue of their stock ownership in CRI.  Item 10 of this report, which
          contains a discussion of the fees and other compensation paid or
          accrued by the Partnership to the General Partners or their
          affiliates, is incorporated herein by reference.  Note 3 of the notes
          to consolidated financial statements, which contains disclosure of
          related party transactions, is also incorporated herein by reference.

     (b)  Certain business relationships.

          The Partnership's response to Item 12(a) is incorporated herein by
          reference.  In addition, the Partnership has no business relationship
          with entities of which the officers and directors of the Managing
          General Partner of the Partnership are officers, directors or equity
          owners other than as set forth in the Partnership's response to Item
          12(a).

     (c)  Indebtedness of management.

          None.

     (d)  Transactions with promoters.

          Not applicable.






                                      III-3
<PAGE>
                                    PART III
                                    --------

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

     (a)  Index of Exhibits  (Listed according to the number assigned in
          -----------------  the table in Item 601 of Regulation S-B.)

          Exhibit No. 3 - Articles of Incorporation and bylaws

          a.   Certificate of Limited Partnership of Capital Realty Investors-
               III Limited Partnership.  (Incorporated by reference from Exhibit
               No. 4 to Registrant's Registration Statement on Form S-11, as
               amended, dated October 24, 1983.)

          Exhibit No. 4 - Instruments defining the rights of security holders,
          including indentures.

          a.   Amended Certificate and Limited Partnership Agreement of Capital
               Realty Investors-III Limited Partnership.  (Incorporated by
               reference from Exhibit No. 4 to Registrant's Registration
               Statement on Form S-11, as amended, dated October 24, 1983.)

          Exhibit No. 10 - Material Contracts.

          a.   Management Services Agreement between CRI and Capital Realty
               Investors-III Limited Partnership.  (Incorporated by reference
               from Exhibit No. 10(b) to Registrant's Registration Statement on
               Form S-11, as amended, dated October 24, 1983.)

          Exhibit No. 27 - Financial Data Schedule.

          a.   Filed herewith electronically.

          Exhibit No. 99 - Additional Exhibits.

          a.   Prospectus of the Partnership, dated May 6, 1983.  (Incorporated
               by reference to Registrant's Registration Statement on Form S-11,
               as amended, dated October 24, 1983.)

     (b)  Reports on Form 8-K
          -------------------

          No reports on Form 8-K were filed during the quarter ended December
          31, 1999.


















                                      III-4
<PAGE>

                                   SIGNATURES
                                   ----------

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                         CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
                         ------------------------------------------------
                         (Registrant)

                         by: C.R.I., Inc.
                             --------------------------------------------
                             Managing General Partner



March 28, 2000               by: /s/ William B.Dockser
-----------------                ---------------------------------------
DATE                             William B. Dockser, Director,
                                   Chairman of the Board,
                                   and Treasurer
                                   (Principal Executive Officer)


     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.



March 28, 2000               by: /s/ H. William Willoughby
-----------------                ----------------------------------------
DATE                             H. William Willoughby,
                                   Director, President
                                   and Secretary





March 28, 2000               by: /s/ Michael J. Tuszka
-----------------                ----------------------------------------
DATE                             Michael J. Tuszka
                                   Vice President
                                   and Chief Accounting Officer
                                   (Principal Financial Officer
                                   and Principal Accounting Officer)














                                      III-5
<PAGE>










                         REPORT OF INDEPENDENT CERTIFIED
                         -------------------------------
                                PUBLIC ACCOUNTANTS
                                -----------------

To the Partners
Capital Realty Investors-III Limited Partnership

     We have audited the consolidated balance sheets of Capital Realty
Investors-III Limited Partnership (a Maryland limited partnership) as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, changes in partners' deficit and cash flows for the years ended
December 31, 1999 and 1998.  These financial statements are the responsibility
of the Partnership's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.  We did not audit the financial
statements of certain Local Partnerships.  The Partnership's share of income or
loss from these Local Partnerships constitutes $1,458,560 and $1,494,893 of
income in 1999 and 1998, respectively, included in the Partnership's net loss.
The financial statements of these Local Partnerships were audited by other
auditors whose reports thereon have been furnished to us, and our opinion
expressed herein, insofar as it relates to the amount included for these Local
Partnerships, is based solely upon the reports of the other auditors.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, based upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Capital Realty Investors-III
Limited Partnership as of December 31, 1999 and 1998, and the consolidated
results of its operations, changes in partners' deficit and cash flows for the
years ended December 31, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States.


                                                              Grant Thornton LLP

Vienna, VA
March 28, 2000








                                      III-6
<PAGE>























              REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -

                           LOCAL PARTNERSHIPS IN WHICH

                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                                  HAS INVESTED*



*    The reports of independent certified public accountants - Local
     Partnerships in which Capital Realty Investors-III Limited Partnership has
     invested were filed in paper format under Form SE on March 29, 2000, in
     accordance with the Securities and Exchange Commission's continuing
     hardship exemption granted January 14, 2000.


























                                      III-7
<PAGE>
                 CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                            CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                          -------------------------------
                                                                                             1999                1998
                                                                                          ------------       ------------
<S>                                                                                       <C>                <C>
Investments in and advances to partnerships                                               $ 19,683,671       $ 21,458,167
Investment in partnership held for sale                                                      1,285,964                 --
Investment in partnership held in escrow                                                     1,267,871                 --
Cash and cash equivalents                                                                   10,045,683         10,804,306
Investment held in escrow                                                                           --            100,000
Acquisition fees, principally paid to related parties, net
  of accumulated amortization of $472,235 and $478,988, respectively                           415,398            483,132
Property purchase costs, net of accumulated amortization of
  $431,180 and $438,256, respectively                                                          401,342            464,823
Other assets                                                                                        --              5,982
                                                                                          ------------       ------------

      Total assets                                                                        $ 33,099,929       $ 33,316,410
                                                                                          ============       ============

                        LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships                                                        $ 21,540,464       $ 22,179,945
Accrued interest payable                                                                    49,549,160         46,337,182
Accounts payable and accrued expenses                                                          168,467            141,849
                                                                                          ------------       ------------
      Total liabilities                                                                     71,258,091         68,658,976
                                                                                          ------------       ------------

Commitments and contingencies

Partners' capital (deficit):

  Capital paid in:
    General Partners                                                                             2,000              2,000
    Limited Partners                                                                        60,001,500         60,001,500
                                                                                          ------------       ------------
                                                                                            60,003,500         60,003,500


  Less:
    Accumulated distributions to partners                                                   (4,687,201)        (4,088,131)
    Offering costs                                                                          (6,156,933)        (6,156,933)
    Accumulated losses                                                                     (87,317,528)       (85,101,002)
                                                                                          ------------       ------------
      Total partners' deficit                                                              (38,158,162)       (35,342,566)
                                                                                          ------------       ------------

      Total liabilities and partners' deficit                                             $ 33,099,929       $ 33,316,410
                                                                                          ============       ============

</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                     III-8
<PAGE>
               CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                For the years ended
                                                                                                    December 31,
                                                                                          ------------------------------
                                                                                             1999               1998
                                                                                          -----------        -----------
<S>                                                                                       <C>                <C>
Share of income from partnerships                                                         $ 1,778,488        $ 7,498,098
                                                                                          -----------        -----------
Other revenue and expenses:

   Revenue:
     Interest and other income                                                                505,503            518,960
                                                                                          -----------        -----------
   Expenses:
     Interest                                                                               3,802,599          8,072,684
     Management fee                                                                           300,000            300,000
     General and administrative                                                               253,844            219,173
     Professional fees                                                                        100,773            102,773
     Amortization of deferred costs                                                            61,075             62,740
     Extension fee                                                                            150,000                 --
                                                                                          -----------        -----------
                                                                                            4,668,291          8,757,370
                                                                                          -----------        -----------
       Total other revenue and expenses                                                    (4,162,788)        (8,238,410)
                                                                                          -----------        -----------

Loss before loss on disposition of investment in partnership                               (2,384,300)          (740,312)
                                                                                          -----------        -----------

Loss on disposition of investment in partnership                                                   --           (109,688)
                                                                                          -----------        -----------

Loss before extraordinary gain from extinguishment of debt                                 (2,384,300)          (850,000)
                                                                                          -----------        -----------

Extraordinary gain from extinguishment of debt                                                167,774                 --
                                                                                          -----------        -----------

Net loss                                                                                  $(2,216,526)       $  (850,000)
                                                                                          ===========        ===========

Net loss allocated to General Partners (1.51%)                                            $   (33,470)       $   (12,835)
                                                                                          ===========        ===========

Net loss allocated to Initial and Special Limited Partners (1.49%)                        $   (33,026)       $   (12,665)
                                                                                          ===========        ===========

Net loss allocated to Additional Limited Partners (97%)                                   $(2,150,030)       $  (824,500)
                                                                                          ===========        ===========

Net loss per unit of Additional Limited Partnership Interest
  based on 60,000 units outstanding                                                       $    (35.83)       $    (13.74)
                                                                                          ===========        ===========
</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                     III-9
<PAGE>
               CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

           CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT



<TABLE>
<CAPTION>

                                                                Initial and
                                                                  Special        Additional
                                                General           Limited         Limited
                                                Partners          Partners        Partners          Total
                                               -----------      -----------     ------------     ------------
<S>                                            <C>              <C>             <C>              <C>
Partners' deficit, January 1, 1998             $(1,293,477)     $(1,277,013)    $(31,322,426)    $(33,892,916)

  Distribution of $10.00 per Additional                 --               --         (599,650)        (599,650)
    Limited Partnership Interest

  Net loss                                         (12,835)         (12,665)        (824,500)        (850,000)
                                               -----------      -----------     ------------     ------------

Partners' deficit, December 31, 1998            (1,306,312)      (1,289,678)     (32,746,576)     (35,342,566)

  Distribution of $10.00 per Additional
    Limited Partnership Interest                        --               --         (599,070)        (599,070)

  Net loss                                         (33,470)         (33,026)      (2,150,030)      (2,216,526)
                                               -----------      -----------     ------------     ------------

Partners' deficit, December 31, 1999           $(1,339,782)     $(1,322,704)    $(35,495,676)    $(38,158,162)
                                               ===========      ===========     ============     ============

</TABLE>


























                    The accompanying notes are an integral part
                    of these consolidated financial statements.

                                       III-10
<PAGE>
                 CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                       CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                For the years ended
                                                                                                     December 31,
                                                                                          -------------------------------
                                                                                              1999               1998
                                                                                          ------------       ------------
<S>                                                                                       <C>                <C>
Cash flows from operating activities:
  Net loss                                                                                $ (2,216,526)      $   (850,000)

  Adjustments to reconcile net loss to net cash used
    in operating activities:
    Share of income from partnerships                                                       (1,778,488)        (7,498,098)
    Amortization of deferred costs                                                              61,075             62,740
    Amortization of discount on purchase money notes                                                --          4,395,748
    Loss on disposition of investment in partnership                                                --            109,688
    Extraordinary gain from extinguishment of debt                                            (167,774)                --

    Changes in assets and liabilities:
      Decrease in other assets                                                                   5,982             13,188
      Increase in accrued interest payable                                                   3,802,599          3,682,600
      Payment of purchase money note interest                                                 (417,328)          (534,007)
      Increase in accounts payable and accrued expenses                                         26,618             39,046
      Decrease in consulting fees payable to related parties                                        --            (42,500)
                                                                                          ------------       ------------
        Net cash used in operating activities                                                 (683,842)          (621,595)
                                                                                          ------------       ------------

Cash flows from investing activities:
  Receipt of distributions from partnerships                                                 1,069,289          6,214,806
  Proceeds from disposition of investments in partnerships                                          --          1,038,159
                                                                                          ------------       ------------
        Net cash provided by investing activities                                            1,069,289          7,252,965
                                                                                          ------------       ------------
Cash flows from financing activities:
  Payment of purchase money note principal                                                    (275,000)                --
  Distributions to Additional Limited Partners                                                (599,070)          (599,650)
  Pay-off of purchase money notes and related interest                                        (370,000)        (3,396,317)
  Investment held in escrow                                                                         --           (100,000)
  Release of investment held in escrow                                                         100,000                 --
                                                                                          ------------       ------------
        Net cash used in financing activities                                               (1,144,070)        (4,095,967)
                                                                                          ------------       ------------
Net (decrease) increase in cash and cash equivalents                                          (758,623)         2,535,403

Cash and cash equivalents, beginning of year                                                10,804,306          8,268,903
                                                                                          ------------       ------------
Cash and cash equivalents, end of year                                                    $ 10,045,683       $ 10,804,306
                                                                                          ============       ============

Supplemental disclosure of cash flow information:
  Cash paid during the year for interest                                                  $    590,621       $ 1,051,093
                                                                                          ============       ===========
</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                    III-11
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.   Organization
          ------------

          Capital Realty Investors-III Limited Partnership (the Partnership) was
     formed under the Maryland Revised Uniform Limited Partnership Act on June
     27, 1983 and shall continue until December 31, 2037, unless sooner
     dissolved in accordance with the Partnership Agreement.  The Partnership
     was formed to invest in real estate by acquiring and holding a limited
     partner interest in limited partnerships (Local Partnerships) which own and
     operate federal or state government-assisted or conventionally financed
     apartment properties located throughout the United States, which provide
     housing principally to the elderly or to individuals and families of low or
     moderate income.

          The General Partners of the Partnership are C.R.I., Inc. (CRI), which
     is the Managing General Partner, and current and former shareholders of
     CRI.  The Initial Limited Partner is Rockville Pike Associates Limited
     Partnership-III, a limited partnership which includes certain current
     officers and former employees of CRI or its affiliates.  The Special
     Limited Partner is Two Broadway Associates II, a limited partnership
     comprised of an affiliate and employees of Merrill Lynch, Pierce, Fenner &
     Smith, Incorporated.

          The Partnership sold 60,000 units at $1,000 per unit of Additional
     Limited Partnership Interest through a public offering.  The offering
     period was terminated in January 1984.

     b.   Method of accounting
          --------------------

          The financial statements of the Partnership are prepared on the
     accrual basis of accounting in conformity with accounting principles
     generally accepted in the United States.

     c.   Principles of consolidation
          ---------------------------

          These financial statements include the accounts of four intermediary
     limited partnerships which have invested in four Local Partnerships which
     own and operate government assisted or conventionally financed apartment
     properties.

     d.   Investments in and advances to partnerships
          -------------------------------------------

          The investments in and advances to Local Partnerships (see Note 2) are
     accounted for by the equity method because the Partnership is a limited
     partner in the Local Partnerships.  Under this method, the carrying amount
     of the investments in and advances to Local Partnerships is (i) reduced by
     distributions received and (ii) increased or reduced by the Partnership's
     share of earnings or losses, respectively, of the Local Partnerships.  As
     of December 31, 1999 and 1998, the Partnership's share of cumulative losses
     of eight and nine respectively, of the Local Partnerships exceeded the
     amount of the Partnership's investments in and advances to those Local
     Partnerships by $9,736,465 and $9,089,320, respectively. Since the
     Partnership has no further obligation to advance funds or provide financing
     to these Local Partnerships, the excess losses have not been reflected in

                                     III-12
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     the accompanying consolidated financial statements.  As of December 31,
     1999 and 1998, cash distributions of $324,528 and $5,269,903, respectively,
     have been received from the Local Partnerships for which the Partnership's
     carrying value is zero.  These distributions are recorded as increases in
     the Partnership's share of income from partnerships.

          Costs incurred in connection with acquiring these investments have
     been capitalized and are being amortized using the straight-line method
     over the estimated useful lives of the properties owned by the Local
     Partnerships.

     e.   Cash and cash equivalents
          -------------------------

          Cash and cash equivalents consist of all money market funds, time and
     demand deposits, repurchase agreements and commercial paper with original
     maturities of three months or less.

     f.   Offering costs
          --------------

          The Partnership incurred certain costs in connection with the offering
     and selling of limited partnership interests.  Such costs were recorded as
     a reduction of partners' capital when incurred.

     g.   Income taxes
          ------------

          For federal and state income tax purposes, each partner reports on his
     or her personal income tax return his or her share of the Partnership's
     income or loss as determined for tax purposes.  Accordingly, no provision
     (credit) has been made for income taxes in these consolidated financial
     statements.

     h.   Use of estimates
          ----------------

          In preparing financial statements in conformity with accounting
     principles generally accepted in the United States, the Partnership is
     required to make estimates and assumptions that affect the reported amounts
     of assets and liabilities and the disclosure of contingent assets and
     liabilities at the date of the financial statements, and of revenues and
     expenses during the reporting period.  Actual results could differ from
     those estimates.

     i.   Fair Value of Financial Instruments
          -----------------------------------

          The financial statements include estimated fair value information as
     of December 31, 1999, as required by Statement of Financial Accounting
     Standards (SFAS) No. 107, "Disclosure About Fair Value of Financial
     Instruments."  Such information, which pertains to the Partnership's
     financial instruments (primarily cash and cash equivalents and purchase
     money notes), is based on the requirements set forth in SFAS No. 107 and
     does not purport to represent the aggregate net fair value of the
     Partnership.


                                     III-13
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

          The balance sheet carrying amounts for cash and cash equivalents
     approximate estimated fair values of such assets.

          The Partnership has determined that it is not practicable to estimate
     the fair value of the purchase money notes, either individually or in the
     aggregate, due to:  (1) the lack of an active market for this type of
     financial instrument, (2) the variable nature of purchase money note
     interest payments as a result of fluctuating cash flow distributions
     received from the related Local Partnerships, and (3) the excessive costs
     associated with an independent appraisal of the purchase money notes.


2.   INVESTMENTS IN PARTNERSHIPS

     a.   Due on investments in partnerships
          ----------------------------------

          As of both December 31, 1999 and 1998, the Partnership held limited
     partner interests in 31 Local Partnerships which were organized to develop,
     construct, own, maintain and operate rental apartment properties which
     provide housing principally to the elderly or to individuals and families
     of low or moderate income.  The remaining principal amounts due on
     investments in the Local Partnerships were as follows.

<TABLE>
<CAPTION>
                                                December 31,
                                        -------------------------
                                           1999          1998
                                        -----------   -----------
     <S>                                <C>           <C>
     Due to local general partners:     $   119,544   $   119,544
     Purchase money notes due in:
       1999                              13,685,000    16,833,981
       2000                               2,009,500            --
       2001                               1,700,000     1,700,000
       2002                               2,011,270     1,511,270
       2003                                 506,288       506,288
       2004                               1,760,000            --
       Thereafter                           322,326     2,082,326
     Less:  unamortized discount           (573,464)     (573,464)
                                        -----------   -----------
            Total                       $21,540,464   $22,179,945
                                        ===========   ===========
</TABLE>

          The amounts due to local general partners will be paid upon the
     occurrence of certain specific events as outlined in the respective Local
     Partnership's partnership agreement.

          The purchase money notes have stated interest rates ranging from 5.57%
     to 12%, certain of which are compounded annually.  Unamortized discounts
     are based on an imputed interest rate of 15% to reflect market interest
     rates which prevailed when the notes were issued.  The resulting discount
     has been recorded by the Partnership and is being amortized to interest
     expense over the life of the respective purchase money notes using the
     effective interest method.  The purchase money notes are payable in full

                                     III-14
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     upon the earliest of:  (1) sale or refinancing of the respective Local
     Partnership's rental property; (2) payment in full of the respective Local
     Partnership's permanent loan; or (3) maturity.  Purchase money notes in the
     aggregate principal amount of $1,700,000, which originally matured on
     December 31, 1997, have been extended until January 31, 2001.  Purchase
     money notes in the aggregate principal amount of $364,481 matured January
     1, 1999 and were paid off, at a discount, on February 5, 1999.  Purchase
     money notes in the original aggregate principal amount of $1,760,000
     matured on January 1, 1999 and were extended to January 1, 2004.  Purchase
     money notes in the aggregate principal amount of $900,000 matured on
     January 1, 1999 and the parties are in the process of negotiating an
     extension of these notes until January 1, 2004.  Purchase money notes in
     the aggregate principal amounts of $5,280,000 and $5,290,000 matured in
     January and February, 1999, respectively, and were not paid or extended.
     Purchase money notes in the original aggregate principal amount of $775,000
     matured on January 1, 1999, were partially paid, and have been extended to
     January 1, 2002.  Purchase money notes in the original aggregate principal
     amount of $1,275,000 matured on January 1, 1999, and have been extended to
     June 30, 2000.  Purchase money notes in the aggregate principal amount of
     $734,500 matured on August 1, 1999 and had been extended until January 3,
     2000, at which time the Partnership's interest in the related Local
     Partnership was transferred to the noteholders in exchange for the
     cancellation of all principal and accrued interest due under the notes.
     Purchase money notes in the aggregate principal amount of $850,000 matured
     on June 30, 1999 and have not been paid or extended.  Purchase money notes
     in the aggregate principal amount of $1,365,000 matured on October 1, 1999
     and were paid off at a discount in January 2000.  The remaining purchase
     money notes mature during 2002 through 2015.

          The purchase money notes, which are nonrecourse to the Partnership,
     are generally secured by the Partnership's interest in the respective Local
     Partnerships.  There is no assurance that the underlying properties will
     have sufficient appreciation and equity to enable the Partnership to pay
     the purchase money notes' principal and accrued interest when due.  If a
     purchase money note is not paid in accordance with its terms, the
     Partnership will either have to renegotiate the terms of repayment or risk
     losing its partnership interest in the Local Partnership.  The
     Partnership's inability to pay certain of the purchase money note principal
     and accrued interest balances when due, and the resulting uncertainty
     regarding the Partnership's continued ownership interest in the related
     Local Partnerships, does not adversely impact the Partnership's financial
     condition because the purchase money notes are nonrecourse and secured
     solely by the Partnership's interest in the related Local Partnerships.
     Therefore, should the investment in any of the Local Partnerships with
     maturing purchase money notes not produce sufficient value to satisfy the
     related purchase money notes, the Partnership's exposure to loss is limited
     because the amount of the nonrecourse indebtedness of each of the maturing
     purchase money notes exceeds the carrying amount of the investment in, and
     advances to, each of the related Local Partnerships.  Thus, even a complete
     loss of the Partnership's interest in one of these Local Partnerships would
     not have a material adverse impact on the financial condition of the
     Partnership.  See further discussion of certain purchase money notes,
     below.

          The following chart presents information related to purchase money
     notes which have matured, have been extended to mature, or are scheduled to
     mature through December 31, 2000, and which remain unpaid or unextended as

                                     III-15
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     of March 28, 2000.  Excluded from the following chart are purchase money
     notes which matured through December 31, 1999, and which have been paid
     off, cancelled, or extended on or before March 28, 2000.























































                                     III-16
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

<TABLE>
<CAPTION>

                                                                                                    Carrying Amount
                                                                        Aggregate                   of Partnership's
                                              Aggregate                 Accrued                      Investment in
                                              Principal                 Interest                    and Advances to
                   Number of                   Balance                  Balance                     Underlying Local
    Purchase       Underlying                   as of                    as of                      Partnerships as
   Money Note        Local      Percentage     December    Percentage   December       Percentage    of December        Percentage
 (PMN) Maturity   Partnerships   of Total      31, 1999     of Total    31, 1999        of Total       31, 1999          of Total
----------------  ------------  ----------   -----------   ----------   ----------     ----------   ----------------    ----------
<S>               <C>           <C>          <C>           <C>          <C>            <C>          <C>                 <C>
1st Quarter 1999        6            19%     $10,590,000         48%    $22,110,410         45%       $  6,464,402           33%
2nd Quarter 1999        1             3%         850,000          4%      1,665,072          3%          1,375,042            7%
2nd Quarter 2000        1             3%       1,275,000          6%      3,513,449          7%          4,828,924           24%
                     ----         -----      -----------      -----     -----------      -----        ------------        -----
Total through
 12/31/2000             8            25%     $12,715,000         58%    $27,288,931         55%       $ 12,668,368           64%
                     ====         =====      ===========      =====     ===========      =====        ============        =====

Total, Local
  Partnerships         31           100%     $21,994,384        100%    $49,515,184        100%       $ 19,683,671          100%
                     ====         =====      ===========      =====     ===========      =====        ============        =====

</TABLE>

          The Managing General Partner is continuing to investigate possible
     alternatives to reduce the Partnership's debt obligations.  These
     alternatives include, among others, retaining the cash available for
     distribution to meet the purchase money note requirements, paying off
     certain purchase money notes at a discounted price, extending the due dates
     of certain purchase money notes, refinancing the respective properties'
     underlying debt or selling the underlying real estate and using the
     Partnership's share of the proceeds to pay or buy down certain purchase
     money note obligations.  Although the Managing General Partner has had some
     success applying these strategies in the past, the Managing General Partner
     cannot assure that these strategies will be successful.  Based on
     discussions with the holders of purchase money notes maturing through
     December 31, 2000, the Managing General Partner can state that, in certain
     instances, the noteholders do not appear to be willing to negotiate any
     extension or discounted payoff.  In such instances, upon maturity of the
     purchase money notes, the noteholders may have the right to foreclose on
     the Partnership's interest in the related Local Partnerships.  In the event
     of a foreclosure, the excess of the nonrecourse indebtedness over the
     carrying amount of the Partnership's investment in the related Local
     Partnership would be deemed cancellation of indebtedness income, which
     would be taxable to Limited Partners at a federal tax rate of up to 39.6%.
     Additionally, in the event of a foreclosure, the Partnership would lose its
     investment in the Local Partnership and, likewise, its share of any future
     cash flow distributed by the Local Partnership from rental operations,
     mortgage debt refinancings, or the sale of the real estate.  Of the 31
     Local Partnerships in which the Partnership is invested as of both December
     31, 1999 and December 31, 1998, the eight Local Partnerships with
     associated purchase money notes which mature through December 31, 2000 and
     which remain unpaid or


                                   III-17
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     unextended as of March 28, 2000, represent the following percentages of the
     Partnership's total distributions received from Local Partnerships and
     share of income from Local Partnerships.

<TABLE>
<CAPTION>


                          Percentage of Total      Partnership's Share of
       For the Years     Distributions Received         Income from
           Ending        from Local Partnerships     Local Partnerships
     -----------------   -----------------------   ----------------------
     <S>                 <C>                       <C>
     December 31, 1999             20%                  $1,138,683
     December 31, 1998              6%                  $1,203,021

</TABLE>

          The Managing General Partner continues to address the maturity and
     impending maturity of its debt obligations and seeks strategies which will
     provide the most favorable outcome to the Additional Limited Partners.
     However, there can be no assurance that these strategies will be
     successful.

          Interest expense on the Partnership's purchase money notes for the
     years ended December 31, 1999 and 1998 was $3,802,599 and $8,072,684,
     respectively.  The accrued interest payable on the purchase money notes of
     $49,515,184 and $46,303,206 as of December 31, 1999 and December 31, 1998,
     respectively, is due on the respective maturity dates of the purchase money
     notes or earlier, in some instances, if (and to the extent of a portion
     thereof) the related Local Partnership has distributable net cash flow, as
     defined in the relevant Local Partnership agreement.

                                Arboretum Village
                                -----------------

          The Partnership paid off its purchase money note, at face value,
     related to Arboretum Village Limited Partnership (Arboretum Village) on
     April 30, 1998 from proceeds received from the refinancing of the Local
     Partnership's first mortgage loan.  See Note 2.c. for further information
     concerning the refinancing.

                                 Audubon Towers
                                 --------------

          The Partnership defaulted on the purchase money note related to
     Audubon Towers Limited Partnership (Audubon Towers) on January 1, 1999 when
     the note matured and was not paid.  The default amount included principal
     and accrued interest of $1,275,000 and $3,272,276, respectively.  In August
     1999, the Partnership and the noteholder agreed to extend the maturity date
     of the purchase money note to June 30, 2000, in exchange for payment of a
     fee not applicable to the note balance.  The maturity date may be further
     extended through January 2, 2003, in the event certain additional payments
     are made.  Under the extension agreement, documents transferring the
     Partnership's interest in Audubon Towers to the noteholder were placed in



                                     III-18
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     escrow to be released to the noteholder upon the earlier of (i) a future
     default by the Partnership on the purchase money note, or (ii) the failure
     to pay the balance of the purchase money note at final maturity.

                 Bartley Manor, Village Square and Village Green
                 -----------------------------------------------

          In September 1995, the Partnership modified purchase money notes
     totaling $1,365,000 relating to Bartley Manor, Village Square and Village
     Green.  In accordance with the modification agreement, the Partnership paid
     an aggregate of $100,000 in accrued interest, and the maturity dates for
     the notes were extended from February 1995 to July 1, 1998.  On July 1,
     1998, the Partnership defaulted on the purchase money notes relating to
     these Local Partnerships when the notes matured and were not paid.  The
     default amount included principal and accrued interest aggregating
     $1,365,000 and $2,185,356, respectively.  During 1998, the Managing General
     Partner and the purchase money noteholders reached an agreement to extend
     the purchase money notes until October 1, 1999.  In connection with the
     extension agreements, in August 1998, the Partnership made interest
     payments of $51,282, $28,571 and $20,147 to the purchase money noteholders
     related to Bartley Manor, Village Square and Village Green, respectively.
     The Partnership defaulted on its purchase money notes related to Bartley
     Manor, Village Square and Village Green on October 1, 1999, when the notes,
     as extended, matured and were not paid.  The default amounts included
     aggregate principal and accrued interest of $1,365,000 and $2,427,685.
     Aggregate accrued interest at December 31, 1999 was $2,474,810.  In January
     2000, the Partnership paid off the notes at a discount.  The discounted
     payoff will result in extraordinary gain from extinguishment of debt of
     approximately $2,865,000 for financial statement purposes in 2000, and in
     cancellation of indebtedness income of approximately $3 million for federal
     tax purposes in 2000.

           Briar Crest I, Briar Crest II, Briar Hills and Indian Hills
           -----------------------------------------------------------

          The Partnership defaulted on its purchase money notes relating to
     Briar Crest I, Briar Crest II, Briar Hills and Indian Hills on January 1,
     1997 when the notes matured and were not paid.  On April 1, 1998, the
     Partnership and the purchase money noteholders related to Briar Crest I,
     Briar Crest II and Briar Hills entered agreements extending the purchase
     money note maturity dates until January 1, 2002.  On July 17, 1998, the
     Partnership and the purchase money noteholders related to Indian Hills
     entered into an agreement extending the purchase money note maturity dates
     until January 1, 2002.  In connection with the extension agreements, the
     Partnership made principal payments of $55,000, $54,800, $55,000 and
     $50,000 to the purchase money noteholders related to Briar Crest I, Briar
     Crest II, Briar Hills and Indian Hills, respectively.  Additionally,the
     Partnership paid $30,243, $34,391, $36,380 and $14,484 to reimburse the
     purchase money noteholders and related entities for Low Income Housing
     Preservation and Resident Homeownership Act of 1990 (LIHPRHA) processing
     and legal fees previously incurred on behalf of Briar Crest I, Briar Crest
     II, Briar Hills and Indian Hills, respectively.  Pursuant to the extension
     agreements, the Partnership will make interest payments on the purchase
     money notes from annual cash flow distributions received from the related
     Local Partnerships to the purchase money noteholders.  During the year
     ended December 31, 1999, the Partnership received cash flow distributions
     of $7,248, $4,351, $10,103, and $17,218 from Briar Crest I, Briar Crest II,

                                     III-19
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     Briar Hills and Indian Hills, respectively.  During the year ended December
     31, 1998, the Partnership received cash flow distributions of $14,316,
     $6,609, $5,337, and $12,231 from Briar Crest I, Briar Crest II, Briar Hills
     and Indian Hills, respectively.

                                  Cedar Valley
                                  ------------

          The Partnership defaulted on its purchase money notes relating to
     Cedar Valley on May 1, 1997 when the notes matured and were not paid.  The
     default amount included principal and accrued interest of $2,100,000 and
     $3,166,710, respectively.  The Managing General Partner and the noteholders
     agreed to extend the purchase money notes until January 1998.  On January
     16, 1998, the noteholders foreclosed on the Partnership's interest in Cedar
     Valley.  As a result of such foreclosure, the noteholders acquired
     ownership of the Partnership's interest in the Local Partnership.  The
     release of the Partnership's purchase money note obligation as a result of
     the Partnership's loss of ownership interest in Cedar Valley resulted in a
     net financial statement gain of approximately $5.5 million during 1998.
     The federal tax gain was approximately $5.8 million.

                                  College Park
                                  ------------

          The Partnership defaulted on its purchase money notes related to
     College Park Limited (College Park) on January 1, 1999, when the notes
     matured and were not paid.  The default amount included aggregate principal
     and accrued interest of $880,000 and $1,622,642, respectively.  As of March
     28, 2000, aggregate principal and accrued interest of $880,000 and
     $1,821,607, respectively, were due.  The Partnership attempted to negotiate
     with the noteholder of record to extend the maturity dates of the purchase
     money notes for five years, but received no response.  In March 1999, the
     Partnership received notice of a collection action on the purchase money
     notes by two individuals who claimed to be the noteholders.  The
     Partnership retained local counsel to defend the lawsuit.  On July 26,
     1999, the Partnership received notice that the plaintiffs moved to dismiss
     their lawsuit.  On September 7, 1999, the Partnership received notice that
     a new collection action had been filed in the proper jurisdiction of
     Mississippi.  The purported noteholders indicated that they will not agree
     to settle the action.  Accordingly, to avoid the expense of further
     litigation, the Partnership has agreed to transfer its interests in the
     Local Partnership to the noteholders in exchange for cancellation of the
     indebtedness, subject to HUD and local regulatory authority consent.  The
     uncertainty about the continued ownership of the Partnership's interest in
     the related Local Partnership does not adversely impact the Partnership's
     financial condition, as discussed above.

          Due to the impending transfer of its interests in College Park, the
     Partnership's basis in this Local Partnership, which was $1,263,122, was
     reclassified to investment in partnership held for sale in the accompanying
     consolidated balance sheet at December 31, 1999.

                                 Congress Plaza
                                 --------------

          The Partnership defaulted on its purchase money note related to
     Kapetan Associates Limited Partnership (Congress Plaza) on January 1, 1999

                                     III-20
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     when the note matured and was not paid.  The default amount included
     principal and accrued interest of $775,000 and $2,162,200, respectively.
     On May 19, 1999, the Partnership and the noteholder agreed to extend the
     maturity date of the purchase money note to January 1, 2002, in exchange
     for a partial principal payment.  Under the extension agreement, documents
     transferring the Partnership's interest in Congress Plaza to the noteholder
     were placed in escrow to be released to the noteholder upon the earlier of
     (i) a future default by the Partnership on the purchase money note, or (ii)
     the failure to pay the balance of the purchase money note on or before
     January 1, 2002.

                                   Glen Agnes
                                   ----------

          The Partnership defaulted on its purchase money note related to Glen
     Agnes Associates (Glen Agnes) on June 30, 1999 when the note matured and
     was not paid.  The default amount included principal and accrued interest
     of $850,000 and $1,597,852, respectively.  As of March 28, 2000, principal
     and accrued interest of $850,000 and $1,692,734, respectively, were due.

          In November 1999, the noteholder filed an action to foreclose on the
     Partnership's interest in the Local Partnership.  In the meantime, an
     affiliate of the noteholder has offered to purchase the Partnership's
     interest in the Local Partnership for a payment of $25,000 to the
     Partnership.  Any transfer of the Partnership's interest in the Local
     Partnership would have to be approved by the California Housing Finance
     Agency.  There is no assurance that such approval will be obtained, or that
     a transfer will take place.

                                  Greeley Manor
                                  -------------

          The Partnership defaulted on its purchase money note related to
     Greeley Manor Company (Greeley Manor) on August 1, 1999 when the note
     matured and was not paid.  The default amount included principal and
     accrued interest of $734,500 and $1,365,808, respectively.  On October 15,
     1999, the Partnership and the noteholder agreed to extend the maturity date
     of the purchase money note to January 3, 2000, in exchange for a partial
     principal payment.  Under the extension agreement, documents transferring
     the Partnership's interest in Greeley Manor to the noteholder were placed
     in escrow to be released to the noteholder upon the earlier of (i) a future
     default by the Partnership on the purchase money note, or (ii) the failure
     to pay the balance of the purchase money note on or before January 3, 2000.
     In January 2000, the documents were released from escrow and the
     Partnership's interest in Greeley Manor was transferred to the noteholder.
     The release of the Partnership's purchase money note obligation as a result
     of the Partnership's loss of ownership interest in Greeley Manor will
     result in a net financial statement gain of approximately $877,000 during
     2000.  The federal tax gain will be approximately $2,816,000.

                   Heritage Estates I and Heritage Estates II
                   ------------------------------------------

          The Partnership defaulted on the purchase money notes related to
     Heritage Estates Associates Phase I (Heritage Estates I) and Heritage
     Estates Associates Phase II (Heritage Estates II) on January 1, 1999 when
     the notes matured and were not paid.  The default amounts included

                                     III-21
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     aggregate principal and accrued interest of $2,600,000 and $4,357,413,
     respectively, for Heritage Estates I and aggregate principal and accrued
     interest of $1,800,000 and $2,689,917, respectively, for Heritage Estates
     II.  As of March 28, 2000, principal and accrued interest of $2,600,000 and
     $4,733,297, respectively, for Heritage Estates I, and $1,800,000 and
     $2,926,184, respectively, for Heritage Estates II were due.  The Managing
     General Partner is currently exploring options to extend the maturity dates
     of the purchase money notes related to Heritage Estates I and Heritage
     Estates II for up to five years.  There is no assurance that extensions
     will be obtained.

                                 Highland Manor
                                 --------------

          The Partnership and the holders of the purchase money notes (in the
     original principal amount of $1,760,000) related to Highland Manor, Limited
     (Highland Manor) have extended the maturity date thereof from January 1,
     1999 to January 1, 2004, subject to the noteholders' right to accelerate
     the maturity date upon nine months' notice.  In connection with the
     extension, in addition to the payments required to be made to the
     noteholders by the Partnership from cash flow distributions from Highland
     Manor, the Partnership agreed to make annual payments to the noteholders on
     January 15th of each calendar year commencing January 15, 2000.  On October
     23, 1998, the Partnership made a payment of interest, which was held in
     escrow, along with the purchase money note modification documents, until
     January 1999, at which time the funds were released to the noteholders.
     This payment has been, and subsequent payments will be, applied first to
     payment of accrued interest, and thereafter to principal.  In January 2000,
     the Partnership made the first annual payment as agreed under the extension
     documents.

                               Lakewood Apartments
                               -------------------

          The Partnership defaulted on its purchase money notes related to
     Eufaula Apartments, Limited (Lakewood Apartments) on January 1, 1999 when
     the notes matured and were not paid.  The default amount included aggregate
     principal and accrued interest of $364,481 and $169,468, respectively.  On
     February 5, 1999, the Partnership paid off, at a discount, the purchase
     money notes related to Lakewood Apartments.  The discounted payoff resulted
     in extraordinary gain from extinguishment of debt of approximately $168,000
     for financial statement purposes, and in cancellation of indebtedness
     income of approximately $180,000 for Federal tax purposes.

                                 Meadow Lanes II
                                 ---------------

          The Partnership defaulted on its purchase money note related to Meadow
     Lanes II Limited Dividend Housing Associates (Meadow Lanes II) on February
     28, 1999 when the note matured and was not paid.  The default amount
     included principal and accrued interest of $650,000 and $1,250,201,
     respectively.  As of March 28, 2000, principal and accrued interest of
     $650,000 and $1,347,362, respectively, were due.  The Partnership is
     currently attempting to negotiate with the noteholder to extend the
     maturity date of the purchase money note.  There is no assurance that an
     extension will be obtained.


                                     III-22
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

                             Rolling Green - Milford
                             -----------------------

          The Managing General Partner successfully negotiated an extension of
     the maturity date of the purchase money notes related to Roberts Milford
     Associates (Rolling Green) from August 31, 1999 to February 28, 2001.
     These notes have an aggregate original principal amount of $2,250,000.  The
     maturity date was further extended to August 31, 2003 because the Local
     Partnership refinanced its mortgage loan prior to the expiration of the
     first extension, which further extension was provided for in the extension
     agreement.  The Partnership's share of the proceeds from the refinancing of
     the property's first mortgage loan were applied against the purchase money
     note principal.  See Note 2.c. for further information concerning the
     refinancing.

          In January 2000, the Partnership received notification from the local
     managing general partner of a potential sale of the Rolling Green Property.
     There is no assurance that a sale will occur.

                                    Southmoor
                                    ---------

          The Partnership paid off its purchase money note, at face value,
     related to K-S Apartments (Southmoor) on June 30, 1998 from proceeds
     received from the sale of its interest in the Local Partnership.  See note
     2.c. for further information concerning the sale.

                                 Tyee Apartments
                                 ---------------

          The Partnership defaulted on its purchase money notes related to Tyee
     Associates (Tyee Apartments) on February 1, 1999 when the notes matured and
     were not paid.  The default amounts included aggregate principal and
     accrued interest of $1,305,000 and $3,312,902, respectively.  As of March
     28, 2000, aggregate principal and accrued interest of $1,305,000 and
     $3,591,904 were due.  As of March 28, 2000, the parties are negotiating a
     discounted payoff of these purchase money notes.  Additionally, the local
     managing general partner has received two offers for the purchase of the
     property.  There is no assurance that either a negotiated discounted payoff
     of the purchase money notes or a sale of the property will occur.

                                Victorian Towers
                                ----------------

          The Partnership defaulted on its purchase money note related to
     Victorian Towers Associates (Victorian Towers) on January 1, 1999 when the
     note matured and was not paid.  The default amount included principal and
     accrued interest of $900,000 and $1,710,560, respectively.  As of March 28,
     2000, principal and accrued interest of $900,000 and $1,865,237 were due.
     The Managing General Partner has reached an agreement in principle with the
     noteholder to extend the maturity date of the purchase money note until
     January 1, 2004, and is awaiting execution of the related documents.  There
     is no assurance that an extension of the maturity date will be finalized.





                                     III-23
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

                               Winchester Gardens
                               ------------------

          The Partnership defaulted on its purchase money notes related to
     Winchester Gardens on December 31, 1997 when the notes matured and were not
     paid.  The default amount included principal and accrued interest of
     $1,700,000 and $2,995,648, respectively.  On April 7, 1998, the Partnership
     was served with a complaint by the holders of the purchase money notes
     suing the Partnership, the Managing General Partner and C.R.H.C.,
     Incorporated (C.R.H.C. is an affiliate of the Managing General Partner),
     for damages and seeking foreclosure on the Partnership's interest in the
     Local Partnership.  On July 29, 1998, the parties agreed to a settlement
     which extended the maturity date of the purchase money notes to January 31,
     2001.  In connection with this settlement, the Partnership granted the
     noteholders an option during the period January 1, 2000 through June 30,
     2000 to purchase the Partnership's and C.R.H.C.'s interests in the Local
     Partnership for an amount equal to the outstanding principal balance of the
     purchase money notes plus accrued interest.  As of March 28, 2000, the
     noteholders had not exercised this option.  The option is void if the
     purchase money notes are satisfied prior to exercise of the option.

                                Woodside Village
                                ----------------

          The Partnership defaulted on its purchase money notes related to
     Woodside Village on February 1, 1999 when the notes matured and were not
     paid.  The default amounts included aggregate principal and accrued
     interest of $3,335,000 and $7,407,102, respectively.  As of March 28, 2000,
     aggregate principal and accrued interest of $3,335,000 and $8,026,612,
     respectively, were due.  The Partnership received a notice of default from
     someone who claimed to be the current noteholder of the smaller note, but
     the original noteholder initially disputed the validity of her claim.  The
     Partnership received a Notice of Default and U.C.C. Foreclosure of Security
     Interest on May 10, 1999 with respect to a scheduled sale of 20% of the
     Partnership's limited partner interest in Woodside Village on June 15,
     1999.  The Partnership has not received any confirmation that the sale
     actually took place.  The Partnership continues to negotiate a discounted
     payoff with the first noteholder. Additionally, the local managing general
     partner has received two offers for the purchase of the property.  There is
     no assurance that a negotiated discounted payoff of the purchase money
     notes or that a sale of the property will occur.

     b.   Interests in profits, losses and cash distributions
          ---------------------------------------------------
               made by Local Partnerships
               --------------------------

          The Partnership has a 96% to 98.99% interest in profits, losses and
     cash distributions (as restricted by various federal and state housing
     agencies) of each Local Partnership.  An affiliate of the Managing General
     Partner of the Partnership is also a general partner of each Local
     Partnership or the intermediary limited partnership which invests in the
     Local Partnership.  The Partnership received cash distributions from the
     rental operations of the Local Partnerships totaling $1,069,289 and
     $6,214,806 during the years ended December 31, 1999 and 1998, respectively.
     As of December 31, 1999 and 1998, 25 and 30, respectively, of the Local
     Partnerships had surplus cash, as defined by their respective regulatory

                                     III-24
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     agencies, in the amounts of $2,177,856 and $1,743,810, respectively, which
     may be available for distribution in accordance with their respective
     regulatory agencies' regulations.

          The cash distributions to the Partnership from the operations of the
     rental properties may be limited by HUD regulations.  Such regulations
     limit annual cash distributions to a percentage of the owner's equity
     investment in a rental property.  Funds in excess of those which may be
     distributed to owners are required to be placed in a residual receipts
     account held by the governing state or federal agency for the benefit of
     the property.

          Upon sale or refinancing of a property owned by a Local Partnership,
     or upon the liquidation of a Local Partnership, the proceeds from such
     sale, refinancing or liquidation shall be distributed in accordance with
     the respective provisions of each Local Partnership's partnership
     agreement.  In accordance with such provisions, the Partnership would
     receive from such proceeds its respective percentage interest of any
     remaining proceeds, after payment of (1) all debts and liabilities of the
     Local Partnership and certain other items, (2) the Partnership's capital
     contributions plus certain specified amounts as outlined in each
     partnership agreement, and (3) certain special distributions to general
     partners and related entities of the Local Partnership.

     c.   Property matters
          ----------------
                                Arboretum Village
                                -----------------

          On April 30, 1998, the local managing general partner of Arboretum
     Villages Limited Partnership (Arboretum Village) refinanced the loan
     secured by a first mortgage on the property owned by Arboretum Village.  A
     portion of the refinancing proceeds was used to pay in full the
     Partnership's purchase money note obligation totaling $774,325 related to
     this property.  Additionally, the Partnership received $2,670,000 later in
     1998 as additional proceeds from the refinancing.  The proceeds received by
     the Partnership (including the proceeds paid to the noteholders) were in
     excess of the Partnership's basis in Arboretum Village by approximately
     $3.4 million, and are included in share of income from partnerships for
     1998.

                                 Highland Manor
                                 --------------

          Under the Mark-to-Market program, the first mortgage debt related to
     the property owned by Highland Manor, Limited (Highland Manor) was
     restructured on July 28, 1998.  This debt was split into two pieces:  a new
     first mortgage loan of $619,872 and a new second mortgage loan of $797,128.
     The balance of the existing first mortgage loan of approximately $841,824
     was forgiven.  The debt forgiveness of $841,824 resulted in taxable income
     to the partners of the Partnership.

          The new first mortgage loan bears interest at the rate of 7.5% per
     annum and will be amortized over its term of 30 years.  The new second
     mortgage loan does not bear interest and requires annual principal payments
     of $39,856.  In addition, the second mortgage loan requires a payment of
     50% of Appreciation, as defined in the loan documents, upon sale or

                                     III-25
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     refinancing.  As part of this transaction, the Ginnie Mae Certificate
     holder sold the restructured first and second mortgage loans to the holder
     of the largest of the three purchase money notes made by the Partnership to
     finance a portion of the acquisition of its interest in Highland Manor.

                                    O'Farrell
                                    ---------

          The local managing general partner of O'Farrell Towers Associates
     (O'Farrell) has received an offer for the purchase of the property, and the
     parties have executed a sales contract dated as of October 12, 1999, with a
     revised projected closing date of May 2000.  Proceeds received by the
     Partnership from the sale of this property would be used to pay off, at a
     discount, the purchase money notes related to O'Farrell.  The contract is
     subject to customary contingencies.  Accordingly, there is no assurance
     that a sale or the payoff of the purchase money notes will occur.

          Due to the impending and likely sale of the property related to the
     Partnership's investment in O'Farrell, the net unamortized amounts of
     acquisition fees and property purchase costs related to O'Farrell, which
     totaled $22,842, have been reclassified to investment in partnership held
     for sale in the accompanying consolidated balance sheet at December 31,
     1999.  For the years ended December 31, 1999 and 1998, distributions from
     O'Farrell represented approximately 3% and 2%, respectively, of total
     distributions from Local Partnerships.  The Partnership's share of income
     from O'Farrell was $0 and $0 for the years ended December 31, 1999 and
     1998, respectively.

                             Rolling Green - Milford
                             -----------------------

          The Managing General Partner successfully negotiated an extension of
     the maturity date of the purchase money notes related to Roberts Milford
     Associates (Rolling Green) to February 28, 2001.  These notes have an
     aggregate original principal amount of $2,250,000; the maturity date had
     been August 31, 1998.  Pursuant to the agreement, the maturity date was
     further extended to August 31, 2003 because the Local Partnership
     refinanced its mortgage loan prior to the expiration of the first
     extension.  The refinancing of the property's mortgage loan closed on July
     31, 1998.  The Partnership's share of the refinancing proceeds, which was
     $1,525,000, was applied against the purchase money note principal.  These
     proceeds were in excess of the Partnership's basis in Rolling Green and
     were included in share of income from partnerships during 1998.

          In January 2000, the Partnership received notification from the local
     managing general partner of a potential sale of the Rolling Green Property.
     There is no assurance that a sale will occur.











                                     III-26
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

                                    Southmoor
                                    ---------

          On June 30, 1998, the Partnership sold its interest in K-S Apartments
     (Southmoor).  The sale of the Partnership's interest in Southmoor generated
     sufficient cash proceeds to pay in full the Partnership's purchase money
     note obligation related to this property.  In addition, on July 1, 1998,
     the Partnership received cash proceeds of $228,000 from the sale.  The sale
     proceeds were not sufficient to recover the Partnership's basis in the
     Local Partnership and resulted in a net financial statement loss of
     $221,727 for 1998.  The federal tax gain was approximately $1.1 million for
     1998.  The Managing General Partner and/or its affiliates earned net fees
     of $31,299 relating to this sale, which the Partnership paid on July 10,
     1998.

                       Villa Mirage I and Villa Mirage II
                       ----------------------------------

          The Partnership's affiliate, C.R.H.C., Incorporated (CRHC), removed
     the Local Managing General Partner (LMGP) of both Villa Mirage I and Villa
     Mirage II in December 1999, due to its failure to address problems
     identified in the 1998 audited financial statements of those lower tier
     partnerships, including overpayments to itself and its affiliated property
     management company.  The removed LMGP and its shareholder and another
     unrelated Local General Partner filed lawsuits against the Partnership and
     CRHC with respect to both Villa Mirage I and II seeking, among other
     things, an accounting and dissolution of the partnerships and damages for
     alleged breaches of the respective partnership agreements (for refusal to
     approve proposed sales of the properties).  The lawsuits do not purport to
     enjoin or reverse the removals of the LMGP.  Subsequently, the same
     plaintiffs filed injunction actions seeking to compel the sales of the
     properties owned by Villa Mirage I and II.  The Partnership has engaged
     local counsel and intends to defend against the actions vigorously.  CRHC
     has moved to have both lawsuits stayed while the disputes are resolved by
     arbitration in accordance with the respective Local Partnership agreements.

     d.   Affordable housing legislation
          ------------------------------

          Some of the rental properties owned by the Local Partnerships are
     dependent on the receipt of project-based Section 8 Rental Housing
     Assistance Payments (HAP) provided by the U.S. Department of Housing and
     Urban Development (HUD) pursuant to Section 8 HAP contracts.  Current
     legislation allows all expired Section 8 HAP contracts with rents at less
     than 100% of fair market rents to be renewed for one year.  Expiring
     Section 8 HAP contracts with rents that exceed 100% of fair market rents
     could be renewed for one year, but at rents reduced to 100% of fair market
     rents (Mark-to-Market).










                                     III-27
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     All expiring Section 8 HAP contracts with rents exceeding comparable market
     rents, and properties with mortgage loans insured by the Federal Housing
     Administration (FHA), became subject to the Mark-to-Market legislation.

          Mark-to-Market implementation will reduce rental income at properties
     which are currently subsidized at higher-than-market rental rates, and will
     therefore lower cash flow available to meet mortgage payments and operating
     expenses.  Each affected property may undergo debt restructuring according
     to terms determined by an individual property and operations evaluation.
     This may involve reducing the first mortgage loan balance to an amount
     supportable by the property, taking into account the property's operating
     expenses and reduced income.  The balance of the amount written down from
     the first mortgage loan will be converted to a non-performing but accruing
     (soft) second mortgage loan.

          Thirteen properties in which the Partnership is invested have Section
     8 HAP contracts expiring in 2000 (some of these properties also have
     related purchase money notes which have matured).  The HAP contracts cover
     substantially all of the apartment units in each property.  Currently, rent
     studies for seven of these properties indicate that the HAP rents are below
     fair market rents, therefore, these properties will likely renew the HAP
     contracts annually until a comprehensive solution is reached with the
     respective purchase money noteholders.  Two of these properties have been,
     or will be, transferred to the purchase money noteholders in 2000.  One
     property entered the Mark-to-Market program in 1998 with a debt adjustment.
     Rent studies relating to the remaining three properties are in progress.

          The Section 8 HAP contracts for the following properties initially
     expired during the government's fiscal year 1998 or 1999, and their
     renewals expire during the year 2000.




























                                     III-28
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

<TABLE>
<CAPTION>
                                                                  Units              Original            Renewed
                                                              Authorized for       Expiration of       Expiration of
                                            Number of        Rental Assistance       Section 8           Section 8
     Property                              Rental Units       Under Section 8      HAP Contract        HAP Contract
     --------                              ------------      -----------------     -------------      --------------
     <S>                                   <C>               <C>                   <C>                <C>
     Bartley Manor                               70                  69               07/31/98          05/31/00
     Briar Crest I                               53                  53               06/30/98          06/30/00
     Briar Crest II                              49                  49               06/30/98          06/30/00
     Briar Hills                                 50                  33               09/30/98          09/30/00
     Greeley Manor                              128                 119               11/01/98          06/30/00 (1)
     Highland Manor                             111                 111               02/08/98          05/12/00 (2)
     Indian Hills Townhouses                     40                  24               09/30/98          09/30/00
     Lakewood Apartments                         50                  50               08/01/99          07/31/00
     Tyee Apartments                            100                  40               07/31/98          07/31/00
     Village Green                               36                  36               09/30/98          04/30/00
     Village Square                              48                  48               09/30/98          04/30/00
     Winchester Gardens Apartments              206                 202               08/31/98          10/05/00
     Woodside Village                           180                 114               08/31/98          08/31/00
                                              -----                 ---
          Total                               1,121                 948
                                              =====                 ===
</TABLE>

     (1)  In January 2000, the Partnership's interest in Greeley Manor was
          transferred to the purchase money noteholder.

     (2)  This property entered the Mark-to-Market program in May 1998.  The
          Section 8 HAP contract will be renewed annually.

          With the uncertainty of continued project-based Section 8 subsidies
     for properties with expiring HAP contracts, there is no assurance that
     these rental properties will be able to maintain the rental income and
     occupancy levels necessary to pay operating costs and debt service.  As a
     result, it is not possible to predict the impact on the Local Partnerships'
     operations and the resulting impact on the Partnership's investments in and
     advances to Local Partnerships at this time.  As of December 31, 1999, the
     carrying amount of the Partnership's investments in and advances to Local
     Partnerships with Section 8 HAP contracts expiring in 2000 was $8,358,963.

          There is a new HUD-sponsored program generally referred to as Mark-up-
     to-Market.  Under this program, properties with expiring Section 8
     contracts that are located in high-rent areas as defined by HUD are
     eligible for rent increases which would be necessary to bring Section 8
     rents in line with market rate rents.  For properties with subsidized FHA
     loans, the rents are adjusted to take into account the benefits the
     property is already receiving from the below-market interest rate by means
     of a HUD determined Interest Subsidy Adjustment Factor.  The purpose of
     this program is to incentivize owners of properties with expiring Section 8
     contracts not to convert these properties to market rate housing.

          In return for receiving market rate rents under Mark-up-to-Market, the
     property owner must enter into a five year conditional Section 8 contract
     with HUD, subject to the annual availability of funding by Congress.  In
     addition, property owners who enter into the Mark-up-to-Market program will

                                    III-29
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     receive a waiver from the cash flow restriction imposed on the property by
     the limited dividend limitation.

     e.   Summarized financial information
          --------------------------------

          Summarized financial information for the Local Partnerships at
     December 31, 1999 and 1998 and for the years ended December 31, 1999 and
     1998 follows.

















































                                     III-30
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

                             COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                   ---------------------------------
                                                                                       1999                 1998
                                                                                   ------------         ------------
     <S>                                                                           <C>                  <C>
     Rental property, at cost, net of accumulated depreciation
       of $81,091,462 and $76,019,851, respectively                                $ 75,945,135         $ 78,608,097
     Land and land improvements                                                      13,570,306           13,698,632
     Other assets                                                                    20,908,627           20,015,580
                                                                                   ------------         ------------
           Total assets                                                            $110,424,068         $112,322,309
                                                                                   ============         ============

     Mortgage notes payable                                                        $104,804,254         $106,967,190
     Other liabilities                                                                9,718,955            9,496,712
                                                                                   ------------         ------------
           Total liabilities                                                        114,523,209          116,463,902

     Partners' deficit                                                               (4,099,141)          (4,141,593)
                                                                                   ------------         ------------
           Total liabilities and partners' deficit                                 $110,424,068         $112,322,309
                                                                                   ============         ============
</TABLE>

                       COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                          For the years ended
                                                                                               December 31,
                                                                                   --------------------------------
                                                                                       1999                 1998
                                                                                   ------------         ------------
     <S>                                                                           <C>                  <C>
     Revenue:
       Rental                                                                      $ 30,406,116         $ 30,043,094
       Interest                                                                         635,738              727,870
       Other                                                                          1,345,584            2,405,224
                                                                                   ------------         ------------
           Total revenue                                                             32,387,438           33,176,188
                                                                                   ------------         ------------
     Expenses:
       Operating                                                                     18,840,503           18,650,830
       Interest                                                                       7,204,038            7,121,588
       Depreciation                                                                   5,186,672            5,128,062
       Amortization                                                                      85,919              208,708
                                                                                   ------------         ------------
            Total expenses                                                           31,317,132           31,109,188
                                                                                   ------------         ------------
     Net income                                                                    $  1,070,306         $  2,067,000
                                                                                   ============         ============
</TABLE>

                                    III-31
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

     f.   Reconciliation of the Local Partnerships' financial statement net
          -----------------------------------------------------------------
               income to taxable income
               ------------------------

          For federal income tax purposes, the Local Partnerships report on a
     basis whereby:  (1) certain revenue and the related assets are recorded
     when received rather than when earned; (2) certain costs are expensed when
     paid or incurred rather than capitalized and amortized over the period of
     benefit; and (3) a shorter life is used to compute depreciation on the
     property as permitted by Internal Revenue Service (IRS) Regulations.  These
     returns are subject to examination and, therefore, possible adjustment by
     the IRS.













































                                     III-32
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   INVESTMENTS IN PARTNERSHIPS - Continued

          A reconciliation of the Local Partnerships' financial statement net
     income reflected above to taxable income follows.

<TABLE>
<CAPTION>

                                                                             For the years ended
                                                                                 December 31,
                                                                       ----------------------------------
                                                                           1999                  1998
                                                                       ------------          ------------
     <S>                                                               <C>                   <C>
     Financial statement net income                                    $  1,070,306          $  2,067,000

     Adjustments:
       Difference in tax depreciation using accelerated
         methods, net of depreciation on construction
         period expenses capitalized for financial
         statement purposes                                               2,228,567            (1,367,316)

       Amortization for financial statement purposes not
         deducted for income tax purposes                                    48,196                49,658

       Miscellaneous, net                                                    97,192               432,219
                                                                       ------------          ------------
     Taxable income                                                    $  3,444,261          $  1,181,561
                                                                       ============          ============

</TABLE>


3.   RELATED-PARTY TRANSACTIONS

     In accordance with the Partnership Agreement, the Partnership paid the
Managing General Partner a fee for services in connection with the review,
selection, evaluation, negotiation and acquisition of the interests in the Local
Partnerships.  The fee amounted to $1,200,000, which is equal to 2% of the
Additional Limited Partners' capital contributions to the Partnership.  The
acquisition fee was capitalized and is being amortized over a 30-year period
using the straight-line method.

     In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership.  For the years ended December 31, 1999 and 1998,
the Partnership paid $188,024 and $161,102, respectively, as direct
reimbursement of expenses incurred on behalf of the Partnership.  Such expenses
are included in the accompanying consolidated statements of operations as
general and administrative expenses.

     Additionally, in accordance with the terms of the Partnership Agreement,
the Partnership is obligated to pay the Managing General Partner an annual
incentive management fee (the Management Fee), after all other expenses of the
Partnership are paid.  The amount of the Management Fee shall be equal to 0.25%
of invested assets, as defined in the Partnership Agreement, and shall be
payable from the Partnership's cash available for distribution, as defined in
the Partnership Agreement, as of the end of each calendar year, as follows:


                                      III-33
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   RELATED-PARTY TRANSACTIONS - Continued

     a.   First, on a monthly basis as an operating expense before any
          distributions to limited partners in the amount computed as described
          in the Partnership Agreement, provided that such annual amount shall
          not be greater than $300,000 and;

     b.   Second, after distributions to the limited partners in the amount of
          1% of the gross proceeds of the offering, the balance of such 0.25% of
          invested assets.

For each of the years ended December 31, 1999 and 1998, the Partnership paid the
Managing General Partner a Management Fee of $300,000.

     The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the
property it owns, payable under certain conditions upon the sale of an
investment in a Local Partnership or the property it owns.  The payment of the
fee is subject to certain restrictions, including the achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners.  The Managing General Partner and/or its affiliates earned net fees of
$117,028 for services relating to the sale of the Partnership's interest in the
Park Heights Towers Local Partnership on February 2, 1996.  On March 25, 1998,
the remaining balance of $42,500 was paid by the Partnership.  Also, the
Managing General Partner and/or its affiliates earned net fees of $31,299 for
services relating to the sale of Southmoor on June 30, 1998.  On July 10, 1998,
these fees were paid by the Partnership.  No such fees were earned or paid in
1999.


4.   PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS

     All profits and losses prior to the first date on which Additional Limited
Partners were admitted were allocated 98.49% to the Initial Limited Partners and
1.51% to the General Partners.  Upon admission of the Special Limited Partner
and the Additional Limited Partners, the interest of the Initial Limited
Partners was reduced to .49%.  The net proceeds resulting from the liquidation
of the Partnership or the Partnership's share of the net proceeds from any sale
or refinancing of the Local Partnerships or their rental properties which are
not reinvested shall be distributed and applied as follows:

       (i)  to the payment of debts and liabilities of the Partnership
            (including all expenses of the Partnership incident to the sale or
            refinancing) other than loans or other debts and liabilities of the
            Partnership to any partner or any affiliate; such debts and
            liabilities, in the case of a non-liquidating distribution, to be
            only those which are then required to be paid or, in the judgment
            of the Managing General Partner, required to be provided for;
      (ii)  to the establishment of any reserves which the Managing General
            Partner deems reasonably necessary for contingent, unmatured or
            unforeseen liabilities or obligations of the Partnership;
     (iii)  to each partner in an amount equal to the positive balance in his
            capital account as of the date of the sale or refinancing, adjusted
            for operations and distributions to that date, but before
            allocation of any profits for tax purposes realized from such sale
            or refinancing and allocated pursuant to the Partnership Agreement;
      (iv)  to the limited partners (A) an aggregate amount of proceeds from
            sale or refinancing and all prior sales or refinancings equal to
            their capital contributions, without reduction for prior cash

                                     III-34
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued

            distributions other than prior distributions of sale and
            refinancing proceeds, plus (B) an additional amount equal to a
            cumulative noncompounded 6% return on each limited partners'
            capital contribution, reduced, but not below zero, by (1) an amount
            equal to 50% of the losses for tax purposes plus tax credits
            allocated to such limited partner and (2) distributions of net cash
            flow to each limited partner, such return, losses for tax purposes
            and net cash flow distributions commencing on the first day of the
            month in which the capital contribution was made;
       (v)  to the repayment of any unrepaid loans theretofore made by any
            partner or any affiliate to the Partnership for Partnership
            obligations and to the payment of any unpaid amounts owing to the
            General Partners pursuant to the Partnership Agreement;
      (vi)  to the General Partners in the amount of their capital
            contributions;
     (vii)  thereafter, for their services to the Partnership, in equal shares
            to certain general partners (or their designees), whether or not
            any is then a general partner, an aggregate fee of 1% of the gross
            proceeds resulting from (A) such sale (if the proceeds are from a
            sale rather than a refinancing) and (B) any prior sales from which
            such 1% fee was not paid to the General Partners or their
            designees; and,
    (viii)  the remainder, 12% to the General Partners (or their assignees), 3%
            to the Special Limited Partner and 85% to the Initial and
            Additional Limited Partners (or their assignees).

     Fees payable to certain general partners (or their designees) under (vii)
above, together with all other property disposition fees and any other
commissions or fees payable upon the sale of apartment properties, shall not in
the aggregate exceed the lesser of the competitive rate or 6% of the sales price
of the apartment properties.

     The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the
property it owns.  The fee would only be payable upon the sale of an investment
in a Local Partnership or the property it owns and would be subject to certain
restrictions, including the achievement of a certain level of sales proceeds and
making certain minimum distributions to limited partners.  The Managing General
Partner and/or its affiliates earned net fees of $117,028 for services relating
to the sale of the Partnership's interest in the Park Heights Towers Local
Partnership on February 2, 1996.  On March 25, 1998, the remaining balance of
$42,500 was paid by the Partnership.  Also, the Managing General Partner and/or
its affiliates earned net fees of $31,299 for services relating to the sale of
Southmoor on June 30, 1998.  On July 10, 1998, these fees were paid by the
Partnership.  No such fees were earned or paid in 1999.

     Pursuant to the Partnership Agreement, all cash available for distribution,
as defined, shall be distributed, not less frequently than annually, 97% to the
Additional Limited Partners, 1% to the Special Limited Partner, 0.49% to the
Initial Limited Partner and 1.51% to the General Partners, after payment of the
Management Fee (see Note 3), as specified in the Partnership Agreement.  As
defined in the Partnership Agreement, after the establishment of reserves deemed
necessary by the Managing General Partner, after payment of the Management Fee,
and after the distributions described below, the Partnership had no remaining
cash available for distribution for the years ended December 31, 1999 and 1998.



                                     III-35
<PAGE>
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued

     On November 12, 1999, the Partnership made a cash distribution of  $599,070
($10.00 per additional limited partnership interest) to the Additional Limited
Partners out of available cash flow.

     On November 23, 1998, the Partnership made a cash distribution of $599,650
($10.00 per additional limited partnership interest) to the Additional Limited
Partners.  The distribution was a result of the sale of the property relating to
the Partnership's investment in K-S Apartments (Southmoor) and the refinancing
of the Arboretum Village Limited Partnership (Arboretum Village) first mortgage
loan.

     The Partnership received distributions of $1,069,289 and $6,214,806 from
the Local Partnerships during 1999 and 1998, respectively.  The Managing General
Partner intends to reserve all of the Partnership's remaining undistributed cash
for the possible repayment, prepayment or retirement of the Partnership's
outstanding purchase money notes related to the Local Partnerships.


5.   RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET
          LOSS TO TAXABLE LOSS

     For federal income tax purposes, the Partnership reports on a basis
whereby:  (1) certain expenses are amortized rather than expensed when incurred;
(2) certain costs are amortized over a shorter period for tax purposes, as
permitted by IRS Regulations, and (3) certain costs are amortized over a longer
period for tax purposes.  The Partnership records its share of losses from its
investments in limited partnerships for federal income tax purposes as reported
on the Local Partnerships' federal income tax returns (see Note 2.f.), including
losses in excess of related investment amounts.  These returns are subject to
audit and, therefore, possible adjustment by the IRS.  In addition, adjustments
arising from the amortization of discount on the Partnership's purchase money
notes for financial reporting purposes are eliminated for income tax purposes
(see Note 2.a.).

























                                     III-36
<PAGE>
                CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET LOSS
          TO TAXABLE LOSS - Continued

     A reconciliation of the Partnership's financial statement net loss to
taxable loss follows.

<TABLE>
<CAPTION>

                                                                                      For the years ended
                                                                                          December 31,
                                                                                -------------------------------
                                                                                    1999               1998
                                                                                ------------       ------------
<S>                                                                             <C>                <C>
Financial statement net loss                                                    $ (2,216,526)      $   (850,000)

  Adjustments:
    Differences between taxable loss
      and financial statement net loss related
      to the Partnership's equity in the Local Partnerships'
      income or losses                                                             1,618,242         (6,353,141)

    Difference in extraordinary gain from extinguishment of debt                          --            (27,962)

    Costs amortized over a shorter period for income tax purposes                     66,275            (57,341)

    Effect of amortization of discount on purchase money notes for financial
      statement purposes                                                             372,880          4,331,696
                                                                                ------------       ------------
Taxable loss                                                                    $   (159,129)      $ (2,956,748)
                                                                                ============       ============

</TABLE>


























                                     III-37
<PAGE>


                                  EXHIBIT INDEX
                                  -------------


Exhibit                                         Method of Filing
-------                                   -----------------------------

27        Financial Data Schedule         Filed herewith electronically






















































                                     III-38