Shanghai has started bundling state-owned property projects into a real estate investment trust (REIT) totaling RMB 5 billion. The trust will probably begin trading in the third quarter of 2009, and an informed source said China’s REIT market is likely to grow to RMB 1 trillion in the next five years.
Perhaps we should go to Wikipedia and pin down the word REIT before we go any further.
A Real Estate Investment Trust or REIT is a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes.
In return, REITs are required to distribute 90% of their income, which may be taxable, into the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.
Like other corporations, REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges like shares of common stock in other firms.
REITs face challenges from both a slowing economy and the global financial crisis, depressing share values by 40 to 70% in some cases.
Nevertheless, REITs are very popular as financial instruments and there have been reports tthat Shanghai and Tianjin might bundle properties in newer districts to sell as an REIT pilot on the Shanghai and Shenzhen Stock Exchanges.