China’s expanded Reit programme to ease funding for commercial property landlords, widen choices for investors

China will expand its Reit programme to include ‘consumption-related infrastructure projects’ or malls and department stores, widening options for investors

The Reit programme was last broadened in July 2021, adding eligible assets related to renewable energy, affordable housing and tourism projects

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People walk through a shopping mall in Beijing in December 2022. Photo: AP

Published: 1:35pm, 26 Oct 2023Updated: 4:17pm, 26 Oct 2023

China is giving the nation’s property sector another boost by allowing commercial landlords to pool and float their assets via public real estate investment trusts or Reits, as Beijing expands its three-year old experiment to deepen the local capital market.

The China Securities Regulatory Commission (CSRC) updated a directive earlier this month by including “consumption-related infrastructure projects” such as shopping malls and department stores, as part of its Reit programme. China’s 87 billion yuan (US$11.9 billion) Reit market is the fourth-largest in Asia after Japan, Singapore and Hong Kong, according to Cushman & Wakefield, a real estate consultancy.

The move is to “provide investors with a wider variety of options, promote the healthy development of the public market for Reits, as well as improve the ability of capital markets to service the real economy,” the regulator said.

“The property sector is undergoing policy adjustments and the CSRC is loosening restrictions around the funding issue,” said Shen Meng, director at Beijing-based investment firm Chanson & Company. It reflects China’s effort to improve liquidity in the real estate market, rather than specifically help troubled developers ease their debt problems, he added.

The entrance to the China Securities Regulatory Commission office in Beijing. Photo: LightRocket via Getty Images

China first introduced the Reit programme in April 2020, limiting the eligible assets to only large-scale infrastructure developments like toll roads, industrial estates, sewage treatment plants, and logistic warehouses. It was broadened in July 2021 to include assets or projects related to renewable energy, affordable housing, and tourism.

Reits are investment vehicles that derive a regular and stable stream of income from their underlying assets. They also pay regular dividends, typically in the form of new units, to investors.