China reits could top US$6 trillion

Property assets that can be spun off into publicly listed real estate investment trusts on the mainland could top US$6 trillion by 2020 as the authorities speed up regulatory efforts to get them launched.

Market talk is swirling that Beijing will allow the launch of publicly traded reits as early as next year as part of its efforts to support the ailing property industry.

But analysts say obstacles still remain in the way, not least the unresolved issues of taxation, the scope of such reit businesses and exactly who will be allowed to invest.

A rising number of developers, including industry leader China Vanke, have expanded into non-residential real estate sectors in recent years to build shopping malls, office blocks, distribution centres and warehouses that can generate stable rental income, to reduce the volatility in cash flow and operating profits as growth in housing demand looks to ease.

Those types of buildings are the core components of reits around the world.

Globally, initial public offerings of reits now account for more than 70 per cent of real estate floats, triple the level seven years ago. The average size has been about US$300 million since 2009, according to a report by global financial advisory firm EY.

"So far, the majority of investible assets [on the mainland] are concentrated in tier-1 cities," Johnny Shao, an executive director of investment properties for global consultancy CBRE in China, told the .