BEIJING | SHANGHAI: China unveiled plans on Friday to expand the public real estate investment trust market to include commercial properties, after developer China Vanke‘s troubles deepened concerns over the country’s struggling property sector.
China‘s securities regulator published draft rules for a pilot programme of commercial real estate investment trusts (REITs), seeking to “enrich investment and financing tools and support a new growth model for the real estate industry.”
The announcement came after Vanke’s bonds and stocks plunged to record lows this week as the property developer sought to delay an onshore bond repayment for the first time, rekindling worries about a spillover effect for the broader property sector.
It also came a day after China’s state planning agency said it plans to expand China’s REITs scheme to include more types of underlying assets such as hotels, office towers and stadiums.
Currently, eligible assets in China’s REITs program include industrial parks, highways, logistics parks, shopping malls and data centres.
An expansion of China’s REITs scheme would enable developers to raise money more easily while giving public investors access to more types of income-generating properties.
It is not clear if the planned REITs expansion is related to difficulties facing Vanke, which operates both residential and commercial properties.
Ratings agency S&P Global downgraded Vanke on Friday, saying the troubled property developer’s financial commitments are unsustainable due to its weak liquidity levels.
A possible debt restructuring by state-owned Vanke – a household name with many projects in China’s biggest cities – could have an even bigger impact in an already fragile market than the defaults by privately-owned Evergrande and Country Garden.
