Financial Instruments for Attracting Investments in the Real Estate Market

Abstract

Subject of the study: REIT (Real Estate Investment Trust) as equity investment instrument issued by management companies that are involved in the purchase, maintenance and construction of new real estate, and can also buy mortgage-backed securities from banks.

The object of the study is the analysis (Real Estate Investment Trust) real estate market in China.

The purpose of the work is to draw a conclusion about the attractiveness of investment in real estate in modern conditions relative to other tools and to identify the development prospects of REITs in China

Research methods: descriptive-analytical, comparative-comparative, statistical, formant, contextual analysis methods.

This thesis finds that equity REITs are still very immature and are not widely accepted by mass investors in China. The thesis puts forward three suggestions for apartment REITs in China: to streamline the REIT structure and avoid excessive complexity and opacity; to promote information transparency and regulated disclosure mechanism; to encourage and protect equity REIT investors by constraining REITs from taking on too much debt. Finally, the thesis concludes that REITs, as shown by US experience, should be regarded as a great opportunity to cultivate Chinese investors’ confidence in the stock market with its very simple and plain-vanilla structure. With the Chinese government’s strong ambition to increase housing affordability and to deleverage the economy, we foresee continuous legislative breakthroughs and more systematic improvements in the REIT field.

Novelty elements: the current apartment operators are using REITs as debt-financing channels instead of real equity financing. As a result, the leverage level of the real estate sector may not really be decreased at all, but rather increased. With regard to this, the overall leverage level of the emerging apartment REIT companies should be a key factor that must be monitored to embody REIT as an equity investment vehicle.

This work is dedicated to solve a number of difficulties in relevant fields of economy.