Research On The Development Of REITs For Residential Renting In China

In the report of the 19th National Congress of Communist Party of China,it has been proposed that manipulations of the real estate market and the phenomenon of buying real estate properties for investment purpose are not encouraged,while purchasing and renting real estate properties for the purpose of living should be greatly promoted as a long term strategic plan.Notably,such idea emphasizes the nature of living-in for houses and thus has greatly promoted the development of the residential renting market.Large number of young migrants work and gather in the first and second tier cities where the housing prices are quite high and thus the residential renting market could offer more choices for them in the transition period.However,there are several problems for the real estate enterprise to construct the houses for renting and leasing,including the large initial investment,the long operating cycle as well as the long payback cycle and thereby the assistance of financial markets is required.The asset securitization is a crucial tool to revitalize the assets on the balance sheet where the Real Estate Investment Trust(REITs)are playing an important role in financing of the residential renting market.Furthermore,Chinese domestic REITs are still at the early stage of exploration and it is necessary to develop the residential renting market energetically,therefore it is of great significance to choose the REITs for the residential renting market as the research topic in both theoretical and practical levels.This paper sorts out the patterns of REITs and analyses the current situations of the development of REITs for residential renting in China.It also makes deep research on the typical cases of pre-REITs in domestic residential renting market--three residential renting pre-REITs issued in 2017 by using the method of case analysis and comparative analysis.This paper studies the issuing situations,operating modes and innovations as well as shortcomings of the REITs in the residential renting field.It is found that the domestic residential renting REITs are facing a series of problems,including laws and regulations,imperfect tax mechanisms,high costs of underlying estates,unstable profits and the impacts of the development of external environment problems,and this paper puts forward some constructive proposals on these problems.It is concluded in this paper that the issuing pattern of REITs where the underlying estate is the centralized residential renting market satisfies the domestic practice.By integrating the scattered residential renting market with unified reforming management,the scale effect is generated which could reduce the high costs of underlying estates.Apart from that,it is also required to draw lessons from therelatively matured operating pattern of REITs in other countries or regions,improving the organization structure and the laws®ulations of criteria of asset,income,profits distribution and long-term debt.Furthermore,to promote the C-REITs firstly issued in the residential renting field,it is important to make the tax incentive mechanism that satisfy Chinese practices,train specialized talents and enhancing the co-operations of renting market,financial market,government and regulation department.