China Launches Nine REIT’s
China’s highly anticipated REIT pilot program finally came to fruition this week, with the launch of the retail tranches of its first nine REITs all oversubscribed on its first day. China REITs are currently only backed by infrastructure assets packaged in a mutual fund structure, deliberately picked by authorities to spearhead the country’s recovery from the pandemic.
Together with China, there are an estimated 28 infrastructure-backed offerings securitized in various structures listed across the region currently, with a market cap of close to US$80 billion. While this is dwarfed when seen in relation to the value of its infrastructure investments, momentum is building.
The offering in the region’s largest economy adds a compelling dimension to the real assets sector in the region. Given the sheer size of China’s infrastructure market, its pilot programme for REITs is a prelude to a market that could eventually rival that of the US. According to S&P, the securitization of just 1% of such assets implies an over US$2 billion market. India’s infrastructure investment trust market is also expected to expand to over US$100 billion in the next five years, according to CRISIL Ratings.