CHINA - China's central bank is drafting proposals to introduce Real Estate Investment Trusts (REITS) in a bid to lessen liquidity constraints for domestic real estate developers.

Huo Yingli, deputy director in the financial market department of the People's Bank of China, revealed at the State Council Information Office in Beijing on Monday the Government was formulating plans for REITs to help boost the Chinese property market.

Qi Ji, China's vice minister of housing, also said: "The effort is to help developers because they have tended to rely on commercial banks as the primary source of funds."

Banks had extended 2.95tn Yuan (€315bn) in home loans by the end of November 2008, up 10.6% on 2007.

The introduction of REIT legislation will take some time however, given the number of departments and intermediaries involved in submitting the proposal to the State Council Information Office.

The State Council Information Office revealed the government's plans to launch REITs last month but did not outline a timetable for their introduction.

REITs are publicly-traded companies that own and usually manage income-producing real estate. Investors can use REITs to reduce or eliminate corporate income tax in some countries.

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