China green­lights first hous­ing rental quasi-REIT

China Daily (Canada) - - BUSINESS19 - By WU YIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

China re­cently gave the green light to a new fi­nanc­ing prod­uct that is based on rental in­come from apart­ments in ma­jor cities.

The new prod­uct is mod­eled on the lines of quasi-Real Es­tate In­vest­ment Trusts (REIT) which are al­lowed to use se­cu­ri­ti­za­tion tech­niques to mon­e­tize as­sets and ac­cess fund­ing. It would also sig­nal yet an­other step by China to fur­ther de­velop its real es­tate mar­ket.

China Young Pro­fes­sional Apart­ments, a Bei­jing-based con­do­minium man­ager backed by Chi­nese ven­ture fund SAIF Part­ners, got the nec­es­sary ap­proval from the Shen­zhen Stock Ex­change to of­fer 270 mil­lion yuan ($40.77 mil­lion) of as­set­backed se­cu­ri­ties to re­tail in­vestors.

An­a­lysts said that the slew of poli­cies sup­port­ing the de­vel­op­ment of the coun­try’s res­i­den­tial leas­ing mar­ket would en­cour­age more fi­nanc­ing in­no­va­tions in the sec­tor. The mar­ket is also likely to see more as­set-backed se­cu­ri­ti­za­tion and com­mer­cial mort­gage-backed se­cu­ri­ti­za­tion in the fu­ture, they said.

De­vel­op­ing the coun­try’s hous­ing rental mar­ket has been one of the long-term strate­gies en­vis­aged by pol­icy mak­ers for sus­tain­able and steady growth of the real es­tate mar­ket in China.

Mean­while China’s cen­tral au­thor­i­ties have reaf­firmed their com­mit­ment to en­sure hous­ing mar­ket sta­bil­ity and se­cure sup­plies of hous­ing through mul­ti­ple chan- nels to meet res­i­dents’ de­mands.

“We must not for­get that hous­ing is for liv­ing and not for spec­u­la­tion”, said Pres­i­dent Xi Jin­ping, also the gen­eral sec­re­tary of the Com­mu­nist Party of China (CPC) Cen­tral Com­mit­tee, in a re­port de­liv­ered to the 19th CPC Na­tional Congress in Bei­jing on Wed­nes­day.

“More sup­plies of qual­ity rental prod­ucts in the mar­ket will pro­vide res­i­dents in China with more op­tions for hous­ing, and are good for the sta­bil­ity and de­vel­op­ment of the res­i­den­tial real es­tate mar­ket in the long run”, said a re­search note from Cush­man &Wake­field China re­search, a real es­tate ser­vices provider.

Ac­cord­ing to the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, au­thor­i­ties have been study­ing poli­cies and reg­u­la­tions for REITs, an im­por­tant com­po­nent for fi­nanc­ing long-term rental projects that rely on the strong ca­pa­bil­ity for cash flows and yields from sta­ble rental in­comes.

“REITs, when in­tro­duced in the China mar­ket, will help in­sti­tu­tions which lease prop­er­ties to dis­trib­ute rental in­come to in­vestors in terms,” said a re­search note from South­west Se­cu­ri­ties.

The REITs, with strong liq­uid­ity, would also en­able in­vestors to buy and sell their hold­ings quickly, the note said.

China’s res­i­den­tial leas­ing mar­ket has been ex­pand­ing fast. Ac­cord­ing to a re­search note from LPlus Re­search In­sti­tute, a real es­tate in­for­ma­tion ser­vices provider, the to­tal mar­ket size is ex­pected to grow from 1.1 tril­lion yuan in 2016 to 4.6 tril­lion yuan in 2030.

Across China, more than 15 cities have launched poli­cies en­cour­ag­ing sup­plies of rental projects to meet res­i­dents’ hous­ing de­mands. These mea­sures in­clude al­lo­cat­ing more land sup­plies for de­vel­op­ment of the leas­ing mar­ket and en­cour­ag­ing more mar­ket play­ers to par­tic­i­pate in the op­er­a­tion and de­vel­op­ment of leas­ing prop­er­ties.

Other cities such as Hangzhou, Shang­hai and Wuhan have been busy set­ting up an on­line leas­ing mar­ket in­for­ma­tion por­tal to give ten­ants and prop­erty op­er­a­tors easy ac­cess to trans­par­ent in­for­ma­tion, such as credit records of ten­ants, op­er­a­tors and agents.

More sup­plies of qual­ity rental prod­ucts in mar­ket will pro­vide res­i­dents in with China more op­tions for hous­ing, and are good for sta­bil­ity of res­i­den­tial real state mar­ket de­vel­op­ment in the long run.”

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