With asset-backed securities sorted for builders, China now needs to develop reit market
Reits are popular with investors in developed markets like the US, but legal and regulatory hurdles are preventing the launch of these products in China
China’s tentative step to allow developers of rental flats to raise funds against their assets has provided a silver lining to developers grappling with unsold inventories, but to kick start the Real estate investment trust (reit) market’s trillion-yuan potential, several obstacles need to be overcome, industry insiders said.
Last week Poly Real Estate, the mainland’s fourth largest developer in terms of sales, secured a 5 billion yuan (US$754 million) quota for the sale of ABS backed by its rented flats portfolio by the Shanghai Stock Exchange. The second such approval within half a month after condominium operator CYPA got the go ahead has ignited the property industry’s enthusiasm for tapping the new financing channel.
“Securitisation of the developers’ self holding properties [will] get a push from the government now, which eagerly encourages development of the residential leasing market,” said Feng Hu, head of valuation and advisory services for North China at Cushman & Wakefield. “Rent thus becomes the focus, which is good for the healthy development of the property market.”
Hu’s team offered valuation and advisory services to Poly and CYPA. The companies now have a long securitisation pipeline.
