Analysis: China developers launch funds to bridge finance gap
By Langi Chiang and Nick Edwards
BEIJING (Reuters) - China's fledgling real estate investment fund market could see a surge of activity in 2012 as property developers launch their own vehicles in a desperate bid to bridge an estimated $111 billion financing gap in the year ahead.
A government-led clampdown on bank, bond, equity and trust market financing for real estate has left developers with little choice other than to set up their own funds, which have raised barely 10 percent of the sum in the past two years that needs to be found to refinance maturing debt in 2012.
On the upside, China's high net-wealth families still favor property investment and funds give them an alternative to buying the physical asset while retaining exposure to the sector.
"Of course, it will take time, but in the next decade, you will see the Chinese property market become more institutionalized," Frank Marriott, Savills' (SVS.L: Quote) senior director of real estate capital markets for the Asia-Pacific, told Reuters.
Time is not on the developers' side. Slowing sales and falling prices are hitting just as refinancing pressures are soaring. Analysts widely expect industry consolidation to accelerate in 2012 and some players, even big ones, will have to sell assets and quit the market.
Reuters China Property Watch r.reuters.com/deh85s