Smdy On Real Estate Investment Trusts’ Application To The Construction Financing Of The Public Rental Housing In China

ABSTRACT:With the indemnificatory housing system’s adjustment in past years, public rental housing is becoming a major part of that in China. As a result of the growth of public rental housing, both government funds and agencies’ loans have been unable to meet the financing needs of public rental housing. Therefore, the real estate investment trusts was proposed to deal with the fundraising difficulties, which is benefit to government, investors, real estate market and capital market.In the first place, the methods of literature research, observation and comparison research were used, and the characteristics of real estate investment trusts in domestic and that in overseas were compared. Considering the situation of China, an operation model of real estate investment trusts’application to the construction financing of the public rental housing was comprehensively designed in three aspects including basic mode, operation process and operation mechanism. During the fundraising, public placement and private placement both should be applied to establish the contractual type and closed-end investment trusts. Meanwhile, there should be strict restriction in organization structure and operation process. Accordingly, based on the perspective of information asymmetry, the quantitative research method and mathematical model method were used to deeply analyze the governance mechanism on adverse selection and moral hazard in public rental housing investment trusts. An information screening model was built against the agent’s adverse selection. Based on this model, the screening contract and decision-making method were put forward to government. In allusion to the moral hazard, a two-stage reward incentive model was built, in which the client, the agent and the government were involved. Hereby, the internal mechanism of benefit distribution was found out. Meanwhile, the formulating basis of government subsidy policy and the client’s incentive contract were provided.Finally, in order to ensure the successful application of REITs to the construction financing of public rental housing, a series of policy suggestions were put forward from two aspects, including legal regulations and supervision mechanism.