Fri, Jul 11, 2003 - Page 10 News List

New real-estate law perceived as business-friendly

By Kevin Chen  /  STAFF REPORTER

The passage of the Real Estate Securitization Statute (不動產證券化條例) Wednesday night bolstered construction sector shares yesterday, with 37 listed construction companies closing limit-up.

The statute -- which defines "real estate" as land, buildings, roads, bridges, tunnels, tracks, piers, parking lots and other objects with economic value -- is expected to help revitalize the property market, analysts said.

"The law, if enacted, will help stimulate the property market and may woo foreign capital into Taiwan's capital markets," said Chuang Meng-han (莊孟翰), an industrial economics professor at Tamkang University.

"But the law is not a cure-all for the real-estate problems we now face," Chuang said.

On the TAIEX yesterday, Cathay Construction Co (國泰建設), the nation's largest developer, gained NT$0.65 to NT$10.20, BES Engineering Corp (中華工程) rose NT$0.33 to NT$5.10, Continental Engineering Corp (大陸工程) added NT$0.80 to NT$12.90 and Goldsun Development & Construction Co (國產建設) gained NT$0.27 to close at NT$4.20.

Securitization of real estate refers to the process of converting properties into marketable equities for sale to investors. The Executive Yuan approved the draft bill to securitize real estate in April last year, but had seen it stuck in the legislature since then.

Under the statute, individual real-estate owners and developers could entrust an authorized investment trust company to issue beneficiary certificates for real estate-backed securities, before selling them to investors.

"The passage of the law is positive for the sector as many land owners and property developers are having liquidity difficulties," said Derek Huang (黃正忠), head of international research at CB Richard Ellis.

The law also offers opportunities for small investors to purchase a share of ownership in a diversified portfolio of real estate-backed securities, which they otherwise would not be able to afford, Huang said.

"This legislation will help inject new capital, from not only conglomerates but also retail investors, into the real estate sector, which has long been at a standstill," Huang said.

While the law was originally designed to revitalize the property market, the goal may prove unrealistic if the basic issue of a real estate market information system is not established, said Huang.

"One of the problems facing the securitization plan is that our trading information is not transparent, a situation which is simply creating more risks for investors," Huang said.

An industry veteran yesterday welcomed the legislation but lamented the fact that undeveloped land will be barred from the securitization plan.

"We're pretty disappointed [regarding this exclusion]," said Lai Cheng-i (賴正鎰), chairman of the Taiwan Construction Development Federation (台灣省建築開發公會). "If we can afford the huge investment in developing new land, we don't need to raise money through the securitization process."

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