China lacks high-quality assets to support reits, say experts
Experts say high borrowing costs and taxes makes such investment vehicles unattractive
Specialist investment vehicles that could answer the funding prayers of cash-strapped mainland property developers are years away from being viable, despite a flurry of policy initiatives to aid the sector in a bid to protect economic growth.
Industry experts say China lacks the high-quality commercial assets needed to make real estate investment trusts - mooted on the mainland for a decade - sufficiently attractive to investors, especially given high borrowing costs and complex property taxes.
And that undermines the hopes of some in the industry that fresh urgings to widen property financing channels from the People's Bank of China in the past month could bring an end to a decade-long regulatory impasse over their launch.
"China's reits will take a long time," John White, the Hong Kong-based managing director of global real estate fund manager Heitman, told the South China Morning Post.
"Reits are good products for more developed markets," White said, adding that those in emerging markets such as Malaysia and Thailand were more volatile.
Reits are listed entities investing in income-producing real estate assets, the earnings of which are mostly distributed to shareholders. They were pioneered in the US in the 1960s.
The reits market in the Asia-Pacific region is worth more than US$250 billion and is dominated by listings in Singapore, Japan and Australia. India has recently published a reits framework, while China has yet to follow up.