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Real Estate Investment Trusts to be eliminated in Shanghai

08-04-2011 10:08 BJT

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With China's tightening policies aimed at cooling the market, Real Estate Investment Trusts, or REITs, have become a popular source of funding for developers. But now, major banks in Shanghai are getting rid of their REITs, and developers facing a new set of challenges.

According to the statistics from People's Bank of China, the nation's real estate loans decreased during the first half of year. They were 600 billion yuan, or about 90 billion dollars, less than the same period last year. But real estate investment trusts, or REITs, have shot up dramatically, now worth over 30 billion dollars. With China's tight controls on loans to the property market, REITs became another way for banks to fund development projects.

Yang Hongxu from E-house China R&D Institute said, "The housing market is very slow right now. Not a lot of people are buying. The new policies aren't making things easier. Real estate developers have to lower the prices to sell properties in order to have a turnover, because it's very hard to them to get funds from banks now."

In the first half of this year, 4 trillion yuan, or over 620 billion dollars, was invested in China's property market. Within that number, 40 percent came from self-financing by developers, 20 percent from bank loans and 5 percent from REITs. Experts say that with the current restrictions, the elimination of REITs will make an already difficult situation worse.

Editor:Li Wanran |Source: CNTV.CN

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