The Executive Yuan of Taiwan is drafting a bill enabling the securitization of real estate. The cabinet has instructed its finance committee to complete the draft within six months, so that it can be submitted to the legislature. The draft should be ready in three to six months.
The bill will include a clause permitting the establishment of special purpose trusts to issue securities underlying real estate assets. Funds raised will be used to develop the real property market, for example, residential and office space properties, shopping centres, and car parks.
This follows the drafting of a financial assets securitization statute in the latter part of 2001. This bill has already passed its first reading in parliament, and all going well, could be passed by April or May. This bill is aimed at the securitization of financial assets, mainly non-performing loans.
The bill for the securitization of real estate is an attempt by the government to make the property market more active. The real estate market in Taiwan is depressed and a number of construction companies have completed buildings and homes that have not yet been sold.
The new government is also being more pro-active in making financial innovations. "The new government is trying to promote more new policies to improve the financial markets and environment here," says Danny Liu, senior associate at Qi Lin International Law Offices in Taiwan.
After the bill is drafted it has to be submitted to the legislative Yuan, which could take a few months to approve. "If everything goes smoothly it might be completed by the end of this year," says Liu. This means that the first property securitizations are unlikely to appear before 2003 at the earliest.