Chinese officials call for more Reits to steady property sector

[SHANGHAI] Officials from China’s securities watchdog on Tuesday (Dec 9) called for the rapid expansion of the public real estate investment trust (Reit) market to help ease developers’ liquidity pressures and meet investor demand for yield.

China should allow commercial properties to be listed as Reits as soon as possible to support a new growth model for developers, Han Zhuo, head of bond supervision at the China Securities Regulatory Commission (CSRC) and Jiang Jie, head of the department’s legal team, jointly wrote in an article.

Authorities should “accelerate the supply of high-quality projects, and reduce the time and opportunity costs of issuing Reits”, they wrote in a Shanghai Securities News article.

Their call comes a week after CSRC published draft rules for a pilot scheme of commercial Reits, which would allow assets such as hotels, office towers and stadiums to be listed. Currently, eligible Reit assets in China are mainly infrastructure projects such as industrial parks, highways, logistics parks and data centres.

China is expanding its Reit sector amid renewed signs of strain in the property sector with developer giant Vanke seeking to delay payments on two bonds amid a sluggish property market.

Kicking off the commercial Reits scheme soon could “alleviate developers’ debt burdens and stabilise property market expectations”, according to Tuesday’s article.

SEE ALSO

China tells stats providers to halt home sales data publication

China’s November new home prices climb but resale values extend declines: survey

China’s private data on home sales vanishes after Vanke turmoil

China property crisis thrust back into spotlight by Vanke plunge

More

China’s Reit market is currently worth roughly 220 billion yuan (S$40 billion) by market capitalisation but has the potential to reach 7.5 trillion yuan by some estimates, CSRC officials wrote.

Reits turn dormant assets into standardised, liquid securities that provide an anchor for asset pricing, while freeing up capital for reinvestment, the article said.

Meanwhile, “there has been rapidly growing demand for Reits as risk-free interest rates keep falling” in China, the officials wrote. REUTERS