As Chinese banks limit their exposure to the frothy real estate market, China’s securities regulator has approved the country’s first ever real estate investment trust (REIT) product valued at USD $837 million.
The property trust investment product, which will be launched by the country’s biggest brokerage CITIC Securities Co Ltd , is intended to provide developers with a new avenue for funding which would enable them to market finished commercial projects effectively.
Reuters reported that CITIC’s REIT will be listed mainly for block trading in the Shenshen Stock Exchange. It also reportedly eyes qualified institutional investors as shareholders wherein they would be given rent dividends from two buildings owned by the firm in Beijing and Shenzhen.
The private REIT project aims to capitalise on Citic Securities’ fixed assets through securitisation, Bloomberg quoted President Cheng Boming as saying in a November speech.
It can be recalled that the government had been striving to put REITs in place for nearly a decade, but due to the global recession in 2009, the pilot scheme was suspended.
The launch of an REIT comes as China’s residential property market has shown signs of cooling with local governments tightening controls on speculative buying, and as banks have made it harder for home buyers and small developers to get loans, Reuters reported.