The Financial Supervisory Commission (FSC) yesterday played down the feasibility of proposals aimed at providing low-cost financing for urban renewal projects through investment funds.
The Ministry of the Interior has proposed relaxing regulations to allow investment funds geared toward urban renewal to gather funding from investors.
The ministry also urged the commission to approve a number of state-run financial holding companies to establish urban renewal-specific securities investment trust subsidiaries that would be able to distribute the investment funds.
The amount of real-estate related loans that may be extended by banks is limited to 30 percent of their overall loan portfolios by the Banking Act (銀行法).
“The biggest roadblock for urban renewal is holdout tenants, who add complexity to the consolidation of a property’s ownership, which is required before a project can move forward,” Securities and Futures Bureau Deputy Director-General Chou Hui-mei (周惠美).
The local market is still flush with cash, and urban renewal projects are not an ideal option for the investing public because of their uncertainty, Chou said.
Urban renewal projects also involve other variables such as tax laws and operating models.
“An urban renewal investment fund would have less than ideal liquidity, and its valuation would be difficult to determine,” Chou said, adding that prospective investors would also be facing an extremely long duration.
Investors looking to tap gains from property developments already have the option of a real-estate investment trust, she said, adding that there are no international precedents for such a funding scheme for urban renewal.
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