China's Rental Housing Sector Gears Up for Real Estate Investment Trust Products for Individual Investors
Liao Shumin
/SOURCE : Yicai
China's Rental Housing Sector Gears Up for Real Estate Investment Trust Products for Individual Investors

(Yicai Global) Sept. 13 -- Chinese public placement real estate investment trust (REIT) fund products for individual investors are ready to be unveiled, and the China Securities Regulatory Commission (CSRC) is undertaking research into and formulation of the relevant policies and rules, the Economic Information Daily reported.

Essentially, REIT is one form of asset securitization. Some real estate enterprises are trying to launch products similar to REITs, which are for institutional investors. The true public placement REIT products have not been introduced so far.

Market insiders point to the huge potential of the Chinese rental housing market. It is estimated that the domestic rental housing market scale will reach CNY1.6 trillion (USD244.9 billion) by 2020 and CNY4 trillion by 2030.

However, all the earnings of REITs come from property rentals and property value appreciation, which are not hugely affected by the stock market or bond market. Most of earnings are used to distribute dividends with relatively high rate of return.

In January this year, the long-term rental apartment operator, Mofang Apartment, largest institutional rental apartment company, launched the first industry asset securitization product, while in August, Ziru under Lianjia also launched an asset securitization product.

However, the insiders express that popularization of REITs in China still faces some tax-related difficulties. For example, in the US, REITs enjoy tax preferences. Real estate projects invested by American REITs are tax-free assets. However, at present, there is no policy that offers tax support for such assets in China, said Guo Yonggang, general manager of the structural financing department of Golden Credit Rating International, a rating agency.

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Keywords: REITs , CSRC