Real estate

China Launches $44.4b Real Estate Fund

Hopes are high that funds from a $44.4 billion real estate fund launched by China could be funneled into completing the swathe of abandoned buildings in Sihanoukville.
Unfinished buildings shadow other skyscrapers. Kiripost/Penh Chamroeun
Unfinished buildings shadow other skyscrapers. Kiripost/Penh Chamroeun

Cambodian analysts weighed in on China’s $44.4 billion real estate fund, banking on hopes that the program can raise funds to bankroll the purchase of unfinished buildings and complete their construction.

On Monday, Reuters reported that China plans to set up a real estate fund, with support from China Construction Bank and the People's Bank of China, to help developers resolve a crippling debt crisis.

If the model works, other banks are slated to follow suit, with a target to raise up to 200 to 300 billion yuan, Reuters reported. It cited an anonymous source, who added that the fund will be used to bankroll the purchase of unfinished housing projects and complete their construction. They will then rent them to individuals as part of the government's drive to boost rented housing.

The news received a mixture of reactions in Cambodia, where the mass exodus of Chinese investors in Preah Sihanouk province has left a swath of abandoned half-built buildings and a stagnant economy.

Real estate developer and economist, Ngeth Chou, said on Monday if the model works, they will scale up fundraising. The primary goal is to mitigate domestic market risk as it says regulators and the local government will help identify developers to work with.

“In that sense, I think it doesn’t benefit Cambodia,” Chou said. “It would benefit Cambodia only if the model works well in China. To prove that, it needs time,” he added.

“The issue is that even if there is a possibility to raise funds to finish those buildings, occupancy rates could be a big challenge as well.”

Chou said to solve unfinished constructions in Preah Sihanouk requires funds that mostly flow from China. However, the Chinese government is currently restricting fund outflow.

“Rich Chinese try to migrate with the money they have, but the government controls it strictly,” he said.

Cambodian Valuers and Estate Agents Association (CVEA) president, Chrek Soknim, said the China real estate fund is a good start.

“If the fund will be allocated in Cambodia it is the best. It is good to start a model,” he said, adding that he hopes China will open up at the end of the year.

Preah Sihanouk provincial deputy governor Long Dimanche said foreign companies are essential to help the province’s incomplete buildings, abandoned after a ban on online gambling was implemented followed by Covid-19.

“I think when foreign companies are interested in this sector, Preah Sihanouk will be a good destination because it's an opportunity,” Dimanche said. He added it is a government policy to develop Preah Sihanouk into a financial hub and special economic zone with multi purposes.