On November 28, the China Securities Regulatory Commission (CSRC) issued the "Announcement on Launching the Pilot Program for Commercial Real Estate Investment Trust Funds (Draft for Comments)" (referred to as the "Announcement"). The document outlines requirements for the registration and operation management of commercial real estate REITs, as well as the responsibilities of fund managers and professional institutions. The initiative aims to diversify capital market investment and financing tools, support the development of new real estate models, and enhance the efficiency of multi-tiered capital markets in serving the real economy.
Commercial real estate REITs are closed-end publicly offered securities investment funds that generate stable cash flows by holding commercial properties and distribute returns to fund shareholders. The Announcement specifies requirements for fund managers, custodians, due diligence, application materials, and commercial real estate assets. It also emphasizes the active operational management responsibilities of fund managers while reinforcing compliance with professional standards and regulatory requirements.
Before applying to raise a commercial real estate REIT, fund managers must conduct comprehensive due diligence on the target properties and engage qualified professional institutions for valuation, legal, and auditing services. The application materials must be submitted to the CSRC for registration. The underlying commercial properties must align with national strategies, development plans, and industrial policies, with clear ownership, defined scope, complete compliance documentation, and a track record of sustained, stable cash flows. During operation, fund managers must actively fulfill property management duties in accordance with laws, regulations, and fund agreements.
Regarding regulatory oversight, the Announcement clarifies the roles of regulatory bodies in supervising commercial real estate REITs and monitoring risks. Stock exchanges, the Securities Association of China, and the Asset Management Association of China will oversee self-regulatory responsibilities for these funds. Other matters related to commercial real estate REITs will follow the "Guidelines for Publicly Offered Infrastructure Securities Investment Funds (Trial)."
After five years of exploration, China’s REITs market has steadily grown, playing a role in revitalizing existing assets, increasing direct financing, and meeting wealth management needs. As of November 27, 77 REITs have been listed, raising RMB 207 billion with a total market cap of RMB 220.1 billion. The market has remained stable, with the CSI REITs Total Return Index rising 22.46% since 2024, establishing REITs as a significant asset class.
"Globally, commercial complexes, retail properties, office buildings, and hotels are key underlying assets for REITs. China’s vast stock of commercial real estate presents opportunities for revitalization and equity financing through REITs," said a CSRC official. By drawing on international experience and adhering to market-oriented and rule-of-law principles, the timely introduction of commercial real estate REITs will enhance their role in supporting new real estate models and improving capital market efficiency.
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