The Study of Real Estate Securitization in Taiwan
Date Issued
2005
Date
2005
Author(s)
Lin, Chang-Tung
DOI
zh-TW
Abstract
Generally real estate developers in Taiwan finance property development with both their own capital, along with mortgage loans from the banks. In recent years, however, due to the continued recession of the property market, Taiwan’s banks' ratio of non-performing real estate loans has been on the increase, with the result that credit facilities available to real estate industry also shrink considerably. How to raise funds from alternate channels other than the banking system has thus become a critical issue. A reasonably workable financing alternative is by way of “real estate securitization”. July 2003 saw the enactment of regulations purported to the securitization of properties. This marked the beginning of an era in which a new market for securitization products was born. It arises at a blessing from all financial, government and academic sectors.
Real estate securitization alters the investor's investment, from a direct investment to a securitized investment. The relationship between the investor and the invested property also changes from direct ownership of the property itself to indirect ownership of a securitized interest over the property. Likewise, the value of the investment also changes from a fixed asset to a liquid asset. Real estate securitization, therefore, enables the real estate industry to utilize the funds raised from the general public purchasing the security from real estate developers or asset management corporations, for undertaking further property development, managing or disposing of the real estate property in an efficient and effective manner. The Real Estate Investment Trust system adopted by Taiwan under the Real Estate Securitization Act is patterned after the Real Estate Investment Trust system of USA; and the Real Estate Asset Trust system generally follows the Land Trust system of Japan.
The positive results in other countries provide a good lesson for the development of domestic market to follow. The successful establishment of a new financial product depends on the degree of liquidity it offers. The availability of conduits for investors to enter and exit the market swiftly without excessive costs will be one of the most important factors. The purpose of this study is to discuss the key ingredients of the Taiwan Real Estate Securitization Act; to analyze its pros, cons and its impacts on the real estate and capital markets, and to review the elements for implementing real estate securitization here. In addition to sound legislative framework, the disclosure of information and the appraisal system of trust property should be reinforced to ensure investors’ rights and to increase market turnover. The success of newly created markets for other innovative financial products in Taiwan suggests that there exists a great growth opportunity for property securitization. Meanwhile, efforts should be focused on protecting market investors’ rights to ensure the stability of this highly regarded market.
Subjects
不動產投資信託
不動產資產信託
不動產證券化
Real Estate Asset Trust
Real Estate Investment Trust
Real Estate Securitization
Type
other
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