Abstract
The creation of Real Estate Investment Trusts (REITs) stems from the United States and originates from the common law concept of business trust. REITs, especially listed REITs, have received the favor of institutional and individual investors due to their taxation pass-through status initially vested by the REIT Act of 1960 of the United States of America, among other merits such as high liquidity, low volatility, less risk, and higher current returns (as REITs are statutorily required to pay out the majority income by dividend in exchange for the recognition of tax pass-through status). Further merits are later noticed along with the development of REITs, known as enabling smaller investors to cost-effectively invest into large-scale and more profitable real estate sector that would otherwise not be achieved at ease, and offering special types of institutions such as pension funds and housing provident funds with an investment alternative.Many regions gradually start to be gravitated by the aforesaid appealing characteristics of REITs learning from the United States’ experience, and have chosen different approaches to build up regulatory regimes to operate and regulate their distinctive REIT schemes. In the Asia region, Hong Kong and Singapore are the second batch of REITs enabling regions right after Japan. In this regard, China has been lagged behind, as a result of that, many REITs favoring investors and real property developers who are interested in investment opportunities tied to the real estate market of China, due to cultural, financial and historical reasons, have been forced to start REITs practices in Hong Kong and Singapore, such practices are later proved to be insightful and successful judging from the performance of initial public offering and the REITs total capitalization growth trend.
Having witnessed the stories of offshore China centric REITs, and inspired by the social welfare housing financing demand, among other political and economic considerations, the central authorities of China start to take a conservative but progressive stance to explore the possibility and feasibility of embracing REITs through different quasi-REIT attempts monitored and administrated by two major financial industry regulators - China Securities Regulatory Commission and China Banking Regulatory Commission. Such attempts recently have been expanded to cover the commercial real estate segment, in addition to the long existing attempts focusing on social welfare housing projects. Also participating are the “Central Government’s Shanghai Free Trade Zone Initiative”, which is deemed as the most appropriate testing field given the relatively flexible policy, the risk-tolerating environment and the open culture for regulatory reform.
In the light of all these recent developments, given the historical leading position of the United States REITs market and the successful experience of two China centric offshore REITs listing hubs – Hong Kong and Singapore, this paper is initialized and structured to achieve a couple of research goals (a) to study and identify significant law sectors required by the operation and development of REITs according to the experience of the United States, Singapore and Hong Kong, (b) to understand the existing regulatory approaches adopted by these three selected jurisdictions, (c) to comprehend the distinctive nature of the real estate market of China in terms of enabling pilot REITs attempts, and finally (d) to propose a regulatory reform proposal to embrace pilot China REITs starting from the testing field of Shanghai Free Trade Zone on the ground of complexity theory that defines the whole society as a complexity evolving system.
| Date of Award | 10 Sept 2015 |
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| Original language | English |
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| Supervisor | Guobin ZHU (Supervisor) |