Real estate investment trust funds (REITs) have received another major document, and the REITs pilot program for affordable rental housing (hereinafter referred to as "rent-guaranteed housing") has officially started.

On May 27, the General Office of the China Securities Regulatory Commission and the General Office of the National Development and Reform Commission jointly issued the "Notice on Regulating the Work on the Pilot Issuance of Real Estate Investment Trust Funds (REITs) in the Infrastructure Sector for Affordable Rental Housing" (hereinafter referred to as the "Notice"

》), accelerate the development of rent-guaranteed housing REITs.

The "Notice" proposes to establish an isolation mechanism in terms of the originator and the use of recovered funds, consolidate the responsibilities of participating institutions, and effectively prevent the illegal flow of REITs recovered funds into the commercial residential and commercial real estate development fields.

"The sponsor (original equity holder) should be an independent legal entity that carries out affordable rental housing business, and is not allowed to carry out commercial housing and commercial real estate development business. The project should have clear ownership, mature operation model, sustainable market-oriented income, and

The "Notice" clearly states that it is strictly prohibited to provide disguised financing for real estate development projects such as non-rental housing in the name of rental housing, or to circumvent real estate control requirements in disguise.

The first order has been declared. Since the release of the "Notice of the National Development and Reform Commission on Further Improving the Pilot Work of Real Estate Investment Trusts (REITs) in the Infrastructure Sector" (i.e. Document No. 958) in July 2021, the relevant pilots have been gradually advanced.

According to incomplete statistics, since the issuance of Document No. 958, more than 50 public REITs projects have been announced for bidding or launched in the market, with a total scale of more than 80 billion yuan, and the industry categories basically cover the nine pilot industries encouraged by the document.

The original rights holders and asset areas are gradually covering the whole country.

Judging from the REITs projects that have been issued, projects in the transportation infrastructure (highway) industry and the park infrastructure industry are the most abundant. However, rent-guaranteed housing REITs are also highly anticipated.

In April this year, the affordable housing project of Shenzhen Talent Housing Group was reported to the National Development and Reform Commission, becoming the first domestic REITs pilot project for rent-guaranteed housing.

Affected by the complex and severe international environment and the impact of the domestic epidemic, the downward pressure on the economy has further increased, and economic data in April fell across the board.

Since May, under the goal of "stabilizing the economic market," major documents to promote the development of REITs have been continuously released.

On May 25, the General Office of the State Council issued the "Opinions on Further Revitalizing Existing Assets and Expanding Effective Investment" (Guobanfa [2022] No. 19), requiring the promotion of the healthy development of real estate investment trust funds (REITs) in the infrastructure field.

On May 27, the "Notice" was released, further proposing specific requirements for rent-guaranteed housing REITs from four aspects to promote the standardized and orderly development of relevant businesses.

First, it is clarified that the initiator should be an independent legal person that carries out affordable rental housing business; second, it emphasizes the strict closed-loop management mechanism for the use of recovered funds to ensure that net recovered funds are prioritized for the construction of new affordable rental housing projects, or for

Other key areas for infrastructure to make up for shortcomings; the third is to consolidate the responsibilities of the institutions and require the controlling shareholders and actual controllers of the promoters not to misappropriate the recovered funds; the fourth is to strengthen communication and collaboration, the China Securities Regulatory Commission and the National Development and Reform Commission will guide Shanghai and Shenzhen Securities

Exchanges, securities regulatory bureaus and local development and reform commissions shall carry out recommendation, review and daily supervision work.

Important pilot industries China Business News learned from investment banks that REITs pilots in the transportation infrastructure (highway) industry and the park infrastructure industry are currently relatively popular in the market.

Jia Zhouqi, co-executive head of the fixed income group of the Investment Banking Department of CICC, previously said in an interview with reporters that there are more cases of issuance of transportation infrastructure projects and park infrastructure projects, which have strong reference value; at the same time, by

Determined by the industry characteristics of such projects, specifically, transportation infrastructure projects have relatively clear business formats and operations, while park infrastructure projects have stronger real estate attributes, which is somewhat similar to the current use of real estate as REITs in foreign countries; in addition, transportation infrastructure projects

And park infrastructure asset holders also have strong demand and willingness to revitalize assets.

However, she also pointed out that among the nine pilot industries proposed in Document No. 985, affordable rental housing is also one of the key development industries for REITs.

"Rental housing is a key area of ??real estate development in the context of China's urbanization during the '14th Five-Year Plan' period. REITs are urgently needed as an exit channel for heavy assets and to form a closed loop of investment and financing." Jia Zhouqi told reporters, currently including Beijing, Shanghai,

Shenzhen and other municipalities as well as large cities with a net population inflow are exploring affordable rental housing projects and promoting REITs.

In her view, rental housing REITs have great market potential and will become a key area for China's REITs in the future.

However, she also mentioned that the current situation of affordable rental housing projects in different regions is different in terms of rental income, legal compliance, financial support, qualification recognition, etc., and there are also certain difficulties in practical promotion, which still need to be gradually promoted in practice.

solve.