The listing of the first mainland-launched real estate investment trust (REIT) in Hong Kong has failed to generate an immediate "bell-cow" effect, as a number of mainland developers say they are not considering launching REITs anytime soon.

These developers believe the time is not ripe to follow Guangzhou Investment REIT, whose shares surged a blistering 15 percent on its debut on Wednesday.

A lack of a legal framework and tax consideration were cited as major reasons for mainlanders' reluctance to launch a REIT.

REIT, a financing tool popular in developed markets but new on the mainland, trades like a stock on the exchanges and invests in real estate directly.

In theory, it offers developers easier and wider access to capital and helps them share risks with a wide range of institutional and individual investors, who in turn get high and steady yield by investing in the trust.

"We don't have any intention to launch or list a REIT," said Hu Xucheng, chairman of Pacific Palace Real Estate Development Co Ltd. The company, a unit owned by China Property Development Fund, is the developer of a 350,000-square-metre complex in Beijing called Richmond Park.

"It is a complicated issue (to launch a REIT on the mainland)," Hu said. "Developers, property owners and many parties are concerned."

Mainland developers find the lack of legal definition for REITs particularly worrisome, he said.

"Regulations governing the development of REITs have not been finalized yet. Without rules of playing, it's hard to begin the game," he said.

Dual taxation appears to be another obstacle.

On the mainland, a property developer and its REIT launches are both subject to corporate taxes, while in overseas markets a REIT is usually exempted from the taxation.

In economies such as Japan and Singapore, more attractive tax regimes were given to investors and companies wanting to spin off their assets into trusts.

"It's premature to for us to talk about REITs on the mainland the market is not established at all," said Lu Yi, manager of public relationship department of R&F Properties Group.

R&F, which trades its shares in Hong Kong, develops residential and commercial properties in Guangzhou and Beijing.

Another Hong Kong-listed mainland developer, Agile Property, is also ruling out possibility of launching a REIT anytime soon.

A spokesperson of the Zhongshan-based company said, "it's too early to do so."

In the long run, however, REIT may gain its popularity on the mainland, developers said.

"REITs will undoubtedly become a mainstream development tool for mainland developers, given the experience in developed market," Hu said.

Within a few years, property trusts have become common practice in Japan, Singapore, the United States and Australia.

(China Daily December 23, 2005)