(Yicai Global) April 27 -- The world’s biggest property market by asset value plans to allow asset-backed securities in the rental sector to help companies raise money and boost the housing market.
China will tighten supervision of the securities while offering support to companies looking to raise money using rentals as collateral, the securities regulator and housing ministry said in a statement on April 25.
The policy will be the first of its kind and follows a trial scheme under which several companies already issued quasi-ABS, the statement added. It will aim to regulate the securities and clearly outline the procedures involved and standards expected, an insider familiar with policy-making affairs told Yicai Global.
The program will prove a positive move at a macroeconomic level, helping to guide private investors to partake in the development of the rental housing market, he added. It will also help companies deleverage and provide more investment options for people looking to make middling rewards at a medium risk.
The government will offer preferential support to those in mid- and large-sized cities and key locations with major policy support, such as Xiongan New Area and regions that use collectively-owned land to build rental apartments via trial programs.
Companies looking to raise money via the ABS scheme will need to meet several conditions. The properties must already be built, registered as a rental, meet safety standards and have a clear ownership structure. They must also be operating normally and generating stable income. The firms behind them cannot have any regulatory black marks against them from within two years before filing.
Another key issue will be how properties are valued, the insider added. The document looks to value properties based on their rental income, rather than their market value.
Editor: James Boynton