Reits seen as a viable funding source for China’s rental home builders, with US$77.6 billion required in short-term

Name: Cheap housing but few economic opportunities for young Chinese in city along Russian border
Uploaded: 2021-10-06T00:30:27.000Z
Duration: 8 min 7 s
Description: Cheap housing but few economic opportunities for young Chinese in city along Russian border

China launched the country’s first real estate investment trusts or Reits on the Shanghai and Shenzhen stock exchanges in a pilot scheme in June

China seen approving the first batch of Reits backed by rental homes, as local governments boost efforts to lower living costs for the youth

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Residential buildings in Beijing, where the government has earmarked 10 per cent of fresh residential land supply for constructing rental homes. Photo: EPA-EFE

Daniel Renin Shanghai

Published: 8:30am, 6 Oct 2021Updated: 8:32am, 6 Oct 2021

China is likely to soon give the go ahead to the first batch of real estate investment trusts (Reits) backed by rental homes, as local governments ramp up efforts to lower the cost of living for young professionals and tame soaring property prices.

The asset-backed securities, offering developers a new funding source, will effectively support construction of rental homes, which could amount to 500 billion yuan (US$77.6 billion) over the next five years, according to analysts.

“Reits are an effective financial derivative to turn rental home assets liquid,” said George Xiong, executive director of valuations at JLL China. “Rental homes could potentially become a major asset to bolster the growth of China’s Reits market.”

While Reits allow owners to raise cash from a bunch of valuable but illiquid assets, they also give investors an avenue to invest in them and collect regular dividends from rents earned by underlying properties.

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Cheap housing but few economic opportunities for young Chinese in city along Russian border

In June, China launched the country’s first Reits on the Shanghai and Shenzhen stock exchanges in a pilot scheme, all of which were greeted with enthusiasm by investors. Nine Reits in total were issued by infrastructure companies.