Housing project trusts raise $1 bn in first 5 months

From January to May this year, 21 trust products linked to projects that involved indemnificatory housing were released, equaling the total number issued last year, according to a report released Wednesday.

A total of 6.5 billion yuan ($1 billion) was raised through the products in the first five months of the year, consulting firm Use Trust Studio said in its report.

The average investment term for the 21 products was 2.03 years, with an average yield rate of 9.52 percent – 0.54 percentage points higher than the average for all trust products, the report said.

Indemnificatory housing includes low-rent housing, affordable housing and relocation projects for residents who have been moved to make way for commercial developments. Trust products linked to the latter were the most popular, raising 6.3 billion yuan.

“Such products offer the highest rates, of around 15-16 percent, as the projects they are funding are composed of between 70 percent and 80 percent commercial properties,” Liu Xiyong, an investment manager at National Trust, told the Global Times on Thursday.

“Commercial projects that are linked to indemnificatory projects have less risk since they are backed by the government,” Li Yang, an analyst at Use Trust Studio, told the Global Times on Thursday.

By contrast, products that fund pure indemnificatory developments offer low yields of around 5 percent to 6 percent, Liu added, making such products poor investments.

“Overall, investments in indemnificatory housing trusts usually have require a minimum of 40 years before returns are made,” Liu said. “No investor will be interested in such low returns, given that the average yield rate for real estate trusts is at least 30 percent.”

The government plans to build 10 million affordable homes this year with an estimated investment of around 1.4 trillion yuan, with trust funds providing a large proportion of this.

Global Times

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