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Since the start of China’s housing reforms 30 years ago, the country’s developers have rushed into aggressive land bids and property construction to meet robust demand in one of the world’s largest and most dynamic property markets. In time, ambitious project launches translated into high leverage for Chinese developers.
China’s commercial banks have traditionally viewed lending to listed developers as low-risk, given their large size and brand recognition. However, frequent changes in government policies and increasingly leveraged balance sheets are driving Chinese developers into actively seeking new methods to fund their businesses. While bank loans and corporate bonds – both offshore and onshore - will remain the main sources of funding for most developers, many players are exploring other funding channels such as perpetual bonds, trust firms, peer-to-peer (P2P) lending, crowdfunding and joint ventures.
In particular, securitization and REITs are two funding mechanisms that currently only have a limited presence in China, but JLL believes they have considerable potential to become popular funding options for Chinese developers and asset holders. In this paper we first overview the current state of real estate finance, then explore the benefits, risks, opportunities and barriers associated with expanding the use of these two newer financing channels.
>>>‘Financing China’s Real Estate: Pragmatism and Creativity Will Prevail’ Infographics
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24 April 2017