China’s largest rental property securitisation valued at 20 billion yuan gets the go-ahead
No issue date revealed for asset-backed notes for which China Construction Bank will be lead underwriter
China will issue its largest bonds backed by rental housing projects, reflecting a pickup in momentum of rented property securitisation as a new funding channel for developers to tap.
China Merchants Group, a state-owned conglomerate, said this week it had teamed up with the Beijing-based China Construction Bank to gain a go-ahead to issue asset-backed notes worth 20 billion yuan (US$3.02 billion) in the country’s interbank market, in what would be China’s largest rental housing securitisation.
China launched a pilot programme this year to build rental housing projects in 13 major cities, including Beijing and Shanghai. The rental market was endorsed by the Chinese government as an alternative to home ownership, and it offers incentives such as education and other benefits to give renters the same rights as homeowners.
“We are expecting to see more rental property securitisation coming into the pipeline,” said Li Tong, an analyst at Shenwan Hongyuan Securities.
“Rental securitisation comes as a good answer to solving the long-term but slow returns from rental projects, giving developers an option to secure funds in a more swift way and ramp up their investment interest and confidence in rental projects,” he said.
The bonds can help developers to better handle the long payback period of rental projects, which can last decades. China is drumming up support for the rental segment with a spate of incentives, in hopes that a growing preference for rented homes can help alleviate the pressure on housing inflation.
In Shanghai, the most populated city in mainland China, the government grants a 30 per cent discount on land supply designated for rental development.