A Research On Capital Market Development And Real Estate Investment Trust

Real Estate Investment Trust is a kind of securitization for investment in the real estate field. It is also a financial product and system innovation due to the mutual influence between the financial field and the real estate field. The birth of REITs greatly promotes the development of the real estate industry and the capital market. At present, China's economy is developing rapidly and the real estate development plays a critical role in stimulating the economic growth and. expanding employment. The rapid development of the real estate calls for more financing channels for its boom. Meanwhile, investors urgently need financial product innovation to share the benefits in the real estate development. Therefore, in order to introduce and develop the REITs, both require us to keep up with the development of China's capital market and real estate market when we deepen the financial reform and expedite the financial innovation.The first section illustrates the background for REITs, and points out that the real estate industry is the critical industry for the national economy development since it plays an important role in upgrading the citizens'living standard. Also given that the real estate industry is heavily dependent on the banking financing, this part points out the necessity for the introduction of REITs, based on the foreign experiences. However, the research for REITs has fallen behind that in the western countries due to the reality that our REITs business is poorly carried our compared with its counterparties in the west.The second section gives a brief introduction for REITs, including its category, characteristics and its history and current development in the foreign countries, and emphasis is paid on its development in United States and Japan. Still this section discusses the necessity and possibility for REITs introduction into our markets, which emphasizes REITs can help the real estate industry, the trust industry's development and the trust fund market regulation.The third section systematically introduces the four phases for REITs initiation, including asset restructuring, preparation for listing, and selling to the investors in the security market, and this section takes Yuexiu real estate trust as one example to describe how REITs'initiation is carried out.The fourth section discusses REITs'organization forms,including corporate trusts and contract trusts categorized according to its law foundation, investors' status, financing channel and so on. Also in this section, the management patterns for REITs are categorized into intranet management and extranet management. Each one is carefully analyzed at its advantages and disadvantages.And this paper suggests that contract trusts and extranet should be our choice when REITs are introduced.The fifth section analyzes how the REITs are operated and its application in China. This section has analyzed the REITs'operation from its investment field, profit distribution, case programming, and its performance assessment. At the end of this section, a REIT in Pudong is analyzed as one example to illustrate REITs application in China.The sixth section analyzes risks born by REITs investors, and gives some suggestions to decrease these risks,including liquidity risk,real estate operation risk, management risk and agency hazard.The seventh section uses two cases analysis both from America and China to carry out an empirical research which concludes REITs can enhance the investment instruments for low risk preference investors.