Practice Briefing China's commercial real estate recovery, REITs and tax policies
| DOI | https://doi.org/10.1108/JPIF-03-2021-0024 |
| Published date | 01 February 2022 |
| Date | 01 February 2022 |
| Pages | 263-274 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Olivia Muszynski,E. Mine Cinar |
Practice Briefing
China’s commercial real estate
recovery, REITs and tax policies
Olivia Muszynski
Loyola University Chicago, Chicago, Illinois, USA, and
E. Mine Cinar
Economics, Loyola University Chicago, Chicago, Illinois, USA
Abstract
Purpose –Commercial property market allows for the potential development of a similar real estate
investment trust (REIT) structure in China as the commercial REITs (C-REIT) such as those offshore in Hong
Kong and Singapore.
Design/methodology/approach –The authors examine tax codes of the present real estate investment
methods in China in order to understand the interest for a new vehicle that specifically focuses on commercial
real estate.
Findings –Given the progress of offshore C-REITS and Chinese government’s emphasis on real estate,
Chinese shareholders will benefit if onshore C-REITS are issued. Crucial to the success of C-REITS will be how
the C-REIT shares will be priced with respect to Net Asset Value of underlying assets.
Research limitations/implications –COVID-19 pandemic has changed government priorities, and
development of C-REITS in real estate for growth may no longer be a priority policy for China.
Practical implications –Liquidity in real estate markets will be enhanced by C-REITS due to participation
of private investors.
Social implications –Onshore C-REITS would allow small and individual investors to have a stake in their
home country’s commercial real estate as an investment security for their own future.
Originality/value –This policy article also includes an interview with real estate professional in China whose
opinions are embedded and added to the article.
Keywords China, C-REITs, Commercial real estate, Onshore and offshore REITs
Paper type Research paper
1. Introduction
Post COVID-19 recovery is a global question, where different countries will take different
paths to recover and stabilize their economies based, among other factors, on their financial
frameworks and institutional settings. While the COVID-19 crisis has disrupted supply
chains, shut down production, decreased household demand in 2020 due to both lock downs
and reduced incomes, fast improvement especially in travel, hospitality and real estate
sectors, which have suffered greatly, is a goal for economic growth.
IMF growth forecasts for growth in real GDP varies by region and country. For instance,
real GDP growth for 2020 was estimated in April, 2020 to be negative 5.9% for the USA,
negative 9.1% for Italy but positive 1.2% for China and 1.9% for India (IMF, 2020). On the
other hand, the year 2021 is given optimistic forecasts with real growth rates of 7.4% for
India, 9.2% for China, 4.8% for Italy and 4.7% for the USA.
In this research, we examine the potential for commercial real estate investment trusts
(REITs) in China and outline the current conditions for real estate sector recovery and
growth. Advantages to REITs are greater liquidity, small minimum investments for
individuals, exemption from taxes, portfolio hedging, limited liability, professional
China’s
commercial
real estate
recovery
263
JEL Classification —F3, G1, G2, O5
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 13 March 2021
Revised 21 June 2021
30 July 2021
Accepted 2 August 2021
Journal of Property Investment &
Finance
Vol. 40 No. 2, 2022
pp. 263-274
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-03-2021-0024
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