The China Securities Regulatory Commission and the Ministry of Housing and Urban-Rural Development are pushing for increased securitisation of the country’s residential rental property assets, amidst Beijing’s drive to expand the home leasing markets in cities.
CSRC and MOHURD have just issued the “Notice Concerning Work in Relation to Advancing the Securitisation of Residential Rental Property Assets” (关于推进住房租赁资产证券化相关工作的通知), which outlines basic requirements and detailed procedures for the securitisation process.
Basic requirements include clear ownership rights, the satisfaction of engineering quality and safety benchmarks, handling of rental property filing procedures, stable cash flow, as well as the absence of any illicit or non-compliant conduct on the part of original owners for the past two years.
The Notice also provides detailed procedures for rental property securitisation, including applications, handling, inspection and issuance, as well as inspection and collection, filing and any transactions involving residential rental properties that are securitised.
According to the Notice securitisation work will give priority to key support region including China’s large and medium-sized cities and the Xiong’an development zone, as well as trial residential rental developments being built on collective construction sites.
The move arrives amidst ongoing efforts by Beijing to expand the home leasing market around China, in order to deal with limited housing supply and overheating real estate prices in urban areas.
The 19th National Chinese Communist Party Congress held in October 2017 called for the “accelerated development of a residential housing system with multiple supply parties that gives equal emphasis to leasing and purchasing.”
Members of industry expect the securitisation of residential rental property to unleash the investment potential of existing stock, raise the efficiency of capital usage, and spur the development of China’s residential rental market.