China’s Cifi Seeks to List Home Rental Arm After Boosting Assets

Chinese developer Cifi Holdings Group Co. aims to list its rental residence business in a few years, as policy makers pledge to tame runaway home prices through a vibrant rental market.

The unit will seek a listing after tripling its portfolio to at least 30 billion yuan ($4.6 billion) in about three years, its Chief Executive Officer Hanah Zhang said. It aims to expand assets under management about tenfold to 100 billion yuan in a decade, she added.

Zhang is betting that more large land plots for rental use will be offered under the government’s push to nurture the market. At China’s top legislative session last month, Premier Li Keqiang emphasized increasing the supply of rental properties and lowering related taxes to address the housing shortage in large cities.

“For rental business, the strategic opportunity undoubtedly lies in the low-cost land supplied by the government,” Zhang said in an interview Wednesday. “Only when the land cost becomes low enough will products with satisfactory returns emerge.”

China currently has no listed companies focusing on the rental home market. There are some entities with characteristics similar to real estate investment trusts that are backed by one or several rental projects, but those aren’t typically for the broad investing public.

Industry Challenges

More than three years after Xi Jinping began voicing support for a housing model that emphasizing renting, the sector still faces challenges of high costs and unappealing returns.

In top-tier cities, housing values were on average 646 times monthly rents last year, far more expensive than a ratio of 200 to 300 seen in global peers, according to property data firm Beijing Zhuge House Hunter Information Technology Co. In tech hub Shenzhen, annual rent is equivalent to 1.6% of housing prices, compared with 6.25% in New York, Zhuge data shows.

In a further blow, last year the rental market was hurt by a lack of capital investment and shrinking demand during the coronavirus.

The Chinese government has responded by selling more land parcels wholly designated for rental apartments and encouraging developers to hold more space in projects for tenants. Land costs of such parcels are about 23% of normal residential plots, paving the way for higher investment yield, Zhang said.

GIC Pte, Ping An Insurance (Group) Co. and insurer China Reinsurance Group Corp. have teamed up with Cifi to invest in rental projects.

The firm will prioritize Hong Kong as a listing venue, Zhang said.

©2021 Bloomberg L.P.

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